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FIN2603-26-EX10
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Green Hill Ltd has made an initial investment of R500 000 in a new project. Due to unfortunate miscalculations, an additional R100 000 had to be invested to successfully start up the project. The cost of capital is 12%. The investment is expected to generate the following cash inflows over the next five years:Year 1: R 80 000; Year 2: R 85 000; Year 3: R150 000; Year 4: R140 000; Year 5: R300 000.
The IRR is ...; therefore, the investment should ...
Green Oak Ltd has made an initial investment of R500 000 in a new project. The firm’s cost of capital is 12%. The investment is expected to generate the following cash inflows over the next five years:Year 1: R 50 000;Year 2: R 60 000; Year 3: R150 000; Year 4: R140 000; Year 5: R300 000.
The profitability index (PI) is ...; therefore, the investment should ...
The financial manager is evaluating a proposal of a new project which has the following cash flows:
| Year | Net cash flows |
| 0 | -R100 000 |
| 1 | R 35 000 |
| 2 | R 35 000 |
| 3 | R 25 000 |
The payback period is ...
The financial manager is evaluating a proposal for a new project with a cost of capital of 13.5%.The cash flows for the project are estimated as follows:
| Year | Net cash flows |
| 0 | -R 2 000 000 |
| 1 | R 850 000 |
| 2 | R 750 000 |
| 3 | R 650 000 |
The NPV is ...
The present value of the cash flows of an investment is expected to total R250 000. The profitability index is calculated at 1.40. Calculate the initial investment.
Blue Chip Ltd has made an initial investment of R200 000 in a new project. Due to unfortunate miscalculations, an additional R100 000 had to be invested to start up the project successfully. The cost of capital is 11.5%.The investment is expected to generate the following cash inflows over the next five years:
| Year 1: | R 20 000 |
| Year 2: | R 100 000 |
| Year 3: | R 400 000 |
| Year 4: | R 400 000 |
| Year 5: | R 500 000 |
The IRR is ...; therefore, the investment should ...