Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) Excel inc, is considering the investment in latest plant= $3 million. Project will be financed with the loan= $2,000,000 which will be repaid over next five years in equivalent annual end of year instalments at the rate of 6.5 percent pa. Suppose straight-line depreciation over the five-year life, and no taxes. Projects cash flows before loan repayments and interest are given in the table below. Cost of capital= 13.35% pa (necessary rate of return on the project). Salvage value= $200,000 is expected at the ending of year five and is included in = cash flows for year five below. Avoid taxes and inflation.

Year                 Cash Inflow
Year One            850,000
Year Two            900,000
Year Three          800,000
Year Four           900,000
Year Five            950,000

You are needed to compute:

(i) The annual loan repayment and a repayment schedule.

(ii) NPV of the project

(iii) the IRR of the project

(iv) AE, annual equal for the project(AE or EAV)

(v) PB, the payback in years (to one decimal place)

(vi) ARR, the accounting rate of return (gross)

(vii) PI (present value index or profitability index)

(viii) Is project acceptable? You should provide the decision for each of methods in parts (ii) to (vii). describe why or why not (give full description)?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914208

Have any Question? 


Related Questions in Basic Finance

Prepare a career preparation portfolioto prepare for your

Prepare a career preparation portfolio. To prepare for your job search, conduct research and meet with people who can help you. First, target specific people within companies where you might like to work. You will need t ...

Empirical studies have established that the betas of

Empirical studies have established that the betas of conglomerate firms have been significantly above 1. What does this imply about diversification as a strong motive for conglomerate mergers? Over a long period of time ...

1 under what conditions might a property with an assumable

1. Under what conditions might a property with an assumable loan sell for more than comparable properties with no assumable loans available? 2. What is meant by the incremental cost of borrowing additional funds? 3. Is t ...

Explain how closeout netting reduces the credit risk for

Explain how closeout netting reduces the credit risk for two firms engaged in several derivatives contracts ? How does the legal system impose risk on a derivatives dealer? Consider a firm that has assets that generate c ...

1 discuss some of the advantages and disadvantages of

1. Discuss some of the advantages and disadvantages of setting up production in LCCs. Consider the benefits of market growth and the risk of an example venture. 2. Look at the information on the RDEs discussed in the tex ...

1 why do adjustable rate mortgages arms seem to be a more

1. Why do adjustable rate mortgages (ARMs) seem to be a more suitable alternative for mortgage lending than PLAMs? 2. List each of the main terms likely to be negotiated in an ARM. What does pricing an ARM using these te ...

1 describe in your words the meaning of spatialtemporal

1. Describe in your words the meaning of spatial/temporal integration in logistical system integration. 2. What justification of logic can be presented to support the placement of a warehouse in a logistical system? 3. W ...

Financial management please respond to the

Financial Management" Please respond to the following: • Explain the three methods for calculating credit card interest and your reason for going with a particular method. • Provide an example of how you can use the powe ...

1 why is the internal revenue service concerned with how

1. Why is the Internal Revenue Service concerned with how partnership agreements in real estate are structured? 2. What is the main difference between the way a partnership is taxed versus the way a corporation is taxed?

What would be the cumulative scatter of the four variables

What would be the cumulative scatter of the four variables we used in the Figures 17.2 through 17.7 if we combined them arithmetically? How does this compare with the scatter computed in the text using the square root of ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen