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Use rate 10% and give assumption that from part b of the question 10% rate is used . Answer urgently required. 111. Tiny Kites is
Use rate 10% and give assumption that from part b of the question 10% rate is used . Answer urgently required.
111. Tiny Kites is a local confectioner, producing and selling jujubes, toffees chocolates and jellybeans. They are planning to introduce a variety of "Gummy" candies to their production as they felt that there exists a demand for that from parents of small children. At the initial stage they are thinking of introducing a bear shaped gummy in three flavors. The machines which can produce these come in different brands, and different capacities. Tiny Kites has collected the following information of a machine and estimated the future cash flows. Cash Flows Initial Investment in the machine 160,000 Life time 4. Annual net Cash flows Generated from each machine 80,000 80,000 40.000 40,000 Tiny Kites is planning to obtain a bank loan for purchasing the machine and has negotiated with a bank to obtain a loan of Rs. 160,000, to be paid off in 4 equal annual instalments. a) Would you recommend this investment ? explain using the NPV of the project b) How much should the loan installment be if the interest rate charged by the bank is 10% c) Show the loan amortization schedule indicating how the instalment payment is divided between capital repayments and interest payments (9 Marks)Step by Step Solution
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