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You have recently been appointed as the Financial Managers Assistant of ABC Ltd and you were provided with the following information for project X,Y. year
You have recently been appointed as the Financial Managers Assistant of ABC Ltd and you were provided with the following information for project X,Y.
year | net cash flow |
1 | 103 331 |
2 | 116 708 |
3 | 111 668 |
4 | 119 543 |
5 | 123 480 |
R342 616 and cost of capital (required rate of return) of 16%. Required;
a) Calculate the net present value (NPV) and the profitability index (PI) of the project X,Y. (12 marks)
b) Evaluate the project using the NPV and PI, and recommend whether to accept or reject the project. Also indicate the effect of the project to the shareholders.
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