Question
The Final Destination-Logistics Ltd wants to analyse a set of potential investments. In particular, there is a number of available investments (A-Z) with the following
The Final Destination-Logistics Ltd wants to analyse a set of potential investments. In particular, there is a number of available investments (A-Z) with the following cash flow streams:
| Year | Investment A | Investment B | Investment C | Investment D | Investment E | Investment Z |
| 0 | -400.000,00 | -320.000,00 | -240.000,00 | -160.000,00 | -480.000,00 | -560.000,00 |
| 1 | 112.000,00 | 80.000,00 | 120.000,00 | 32.000,00 | 160.000,00 | 200.000,00 |
| 2 | 112.000,00 | 80.000,00 | 56.000,00 | 32.000,00 | 160.000,00 | 160.000,00 |
| 3 | 120.000,00 | 120.000,00 | 56.000,00 | 56.000,00 | 160.000,00 | 160.000,00 |
| 4 | 120.000,00 | 120.000,00 | 56.000,00 | 56.000,00 | 128.000,00 | 112.000,00 |
| 5 | 120.000,00 | 120.000,00 | 56.000,00 | 56.000,00 | 120.000,00 | 112.000,00 |
Please assess the above information and answer the following questions if you know that the firms cost of capital is 7%.
- Rank the investments according to their Net Present Value (NPV) and Internal Rate of Return (IRR). Demonstrate your calculations (14%)
- If Final Destination-Logistics can invest up to 960.000, which are the investments that it should prefer? Explain your recommendations. (7%)
- If Final Destination-Logistics can invest up to 1.200.OOOC, which are the investments that it should prefer? Explain your recommendations. (7%)
- Rank the investments according to the Simple Payback method. If Final Destination-Logistics has as an accepted Payback period of 4 years, which investments would be considered as acceptable? Demonstrate your calculations (7%)
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Unlocking Private Company Wealth
Authors: Z. Christopher Mercer, Jim Clifton
1st Edition
097006988X, 978-0970069887
