Vino plc is considering launching a new product. The company accountant has prepared calculations to show that the NPV of the product is estimated to be positive. She has just discovered, however, that some items of information had not been provided to her prior to carwing out her calculations. They are as follows: 1. The new product will be manufactured in a large factory which has spare capacity and where other products are also manufactured. It has recently been decided by senior management that the new product will be charged with 10% of the factow rent. 2. The new product will be financed partly by a loan. Interest charges are expected to be 80,000 per year. What effect (increase/decreaseo effect) will these new items of information have on the estimated NPV of the product? Item 1 Item 2 O A. Decrease Decrease O B. No effect No effect 0 C. Decrease No effect 0 D. No effect Decrease You have just assessed a project involving an immediate cash outflow followed by a series of cash inows over the next seven years, by deducing the net present value (NPV) and the internal rate of return (IRR). You have now discovered that you have underestimated the discount rate. Correcting for the underestimation will have which one of the following effects, relative to your original deductions? O A. Reduction in the NPV and no change in the IRR O B. No change in either the NPV or IRR O C. Increase in the NPV and a reduction in the IRR O D. Increase in both the NPV and the IRR Aggrava Lid is a company that is considering two alternative investments: Project A that would cost $50,000 and Project B that would cost $49,000. The chosen project would commence on 1 January First, think about how net present value (NPV) is defined: (Complete the necessary drop downs.) NPV is a method of investment appraisal based on the of all relevant Next, show the discounted cash flows in this table: (Fill in the relevant cells with their corresponding figures. Round amounts to the nearest E.) Project A (E) Project B (E) Year Cash inflow Discount factor Present values Cash inflow Discount factor Present values 12,500 0.926 18,500 0.926 2 10,000 0.857 2,000 0.857 3 21,000 0.794 17,000 0.794 4 45,000 0.735 35,000 0.735 5 18,000 0.681 25,000 0.681 Total present values Total present values Net cost investment Net cost investment Net present value Net present value The neniart to he shecan on the hacic of its not nracant value would he Deniart | | ( Anewar 'A' or 'R' hare or 'N' if neither )A council's cost oi capital is 6% and a particular capital investment proposal has a 4% internal rate of return. From the information available, which of the statements below correctly describes the capital O A. The proposal has no payback period 0 B. The proposal has a negative net present value 0 C. The proposal is nancially acceptable as the IRR is positive 0 D. The proposal has negative net cash inflows over its life First, think about how net present value (NPV) is defined: (Complete the necessary drop downs.) NPV is a method of investment appraisal based on the of all relevant Next, show the discounted cash flows in this table: (Fill in the relevant cells with their corresponding figures. Round amounts to the nearest E.) Project A (E) Project B (E) Year Cash inflow Discount factor Present values Cash inflow Discount factor Present values 1 10,000 0.926 16,000 0.926 2 12,000 0.857 4,000 0.857 3 31,000 0.794 27,000 0.794 4 33,000 0.735 23,000 0.735 5 13,000 0.681 20,000 0.681 Total present values Total present values Net cost investment Net cost investment Net present value Net present value