FINANCIAL MANEGEMENT ASSIGNMENT-
Question 1: What is the intrinsic value of a cochlear share if your required rate of return is 16% p.a?
Question 2: a) Estimate the cash flows for the project. Tabulate your answer.
|
Year
|
0
|
1
|
2
|
3
|
4
|
|
Prices
|
65,000
|
|
|
|
|
|
Increases Inventory
|
37,500
|
|
|
|
|
|
Increases in Sales
|
|
150,000
|
150,000
|
150,000
|
150,000
|
|
Cost of Sales
|
|
80,000
|
80,000
|
80,000
|
80,000
|
|
Final Sales
|
|
|
|
|
10,000
|
|
Net Cash Flow
|
|
|
|
|
|
|
Discount Factor
|
1
|
0.89286
|
1.69005
|
2.40183
|
3.03735
|
|
Present Value
|
(27,500)
|
205,357
|
388,711
|
552,420
|
728,964
|
b) Calculate the NPV for the project. Should the project be accepted?
Question 3: Option A
|
Year
|
Initial Cost
|
Annual Cash Inflows
|
Annual Cash Outflows
|
Cost of Sales
|
Net Cash Flow
|
Present Value Factors
|
Present Value
|
|
|
|
|
|
|
|
|
|
|
0
|
(160,000)
|
|
|
|
(160,000)
|
1
|
(160,000)
|
|
1
|
|
75,000
|
35,000
|
|
40,000
|
0.90097
|
36,038.8
|
|
2
|
|
75,000
|
35,000
|
|
40,000
|
1.71279
|
68,511.6
|
|
3
|
|
75,000
|
35,000
|
|
40,000
|
2.44434
|
97,773.6
|
|
4
|
|
75,000
|
35,000
|
60,000
|
-20,000
|
3.10361
|
-62,072.2
|
|
5
|
|
75,000
|
35,000
|
|
40,000
|
3.69778
|
147,911.2
|
|
6
|
|
75,000
|
35,000
|
|
40,000
|
4.23333
|
169,333.2
|
|
7
|
|
75,000
|
35,000
|
|
40,000
|
4.71609
|
188,643.6
|
|
8
|
|
75,000
|
35,000
|
|
40,000
|
5.15128
|
206,051.2
|
Option B
|
Year
|
Initial Cost
|
Annual Cash Inflows
|
Annual Cash Outflows
|
Cost of Sales
|
Net Cash Flow
|
Present Value Factors
|
Present Value
|
|
|
|
|
|
|
|
|
|
|
0
|
(227,000)
|
|
|
|
(227,000)
|
1
|
(227,000)
|
|
1
|
|
80,000
|
30,000
|
|
50,000
|
0.90097
|
45,048.5
|
|
2
|
|
80,000
|
30,000
|
|
50,000
|
1.71279
|
85,639.5
|
|
3
|
|
80,000
|
30,000
|
|
50,000
|
2.44434
|
122,217
|
|
4
|
|
80,000
|
30,000
|
|
50,000
|
3.10361
|
155,180.5
|
|
5
|
|
80,000
|
30,000
|
|
50,000
|
3.69778
|
184,889
|
|
6
|
|
80,000
|
30,000
|
|
50,000
|
4.23333
|
211,666.5
|
|
7
|
|
80,000
|
30,000
|
|
50,000
|
4.71609
|
235,804.5
|
|
8
|
|
80,000
|
30,000
|
|
50,000
|
5.15128
|
257,564
|
Compute the following:
I. Net Present Value
II. Profitability Index
III. IRR for each option.