Calculate npv and irr of the project, Basic Statistics

PolyCorp is considering an investment in new plant of $3 million.  The project will be financed with a loan of $2,000,000 which will be repaid over the next five years in equal annual end of year instalments at a rate if 8.5 percent pa.  Assume straight-line depreciation over a five-year life, and no taxes. The projects cash flows before loan repayments and interest are shown in the table below. Cost of capital is 14% pa. A salvage value of $200,000 is included in the cash flow for year five. Polycorp paid $200,000 for a feasibility study on the project about a year ago.

Year

Year One

Year Two

Year Three

Year Four

Year Five

Cash Inflow

950,000

900,000

850,000

850,000

900,000

You are required to calculate:

(a)    the amount of the loan repayments

(b)   repayment schedule showing the annual interest component in the repayments

(c)    NPV of the project

(d)   the IRR of the project

(e)    the annual equivalent (AE or EAV)

(f)    the payback in years (to one decimal place)

(g)   the accounting rate of return (gross and net)

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

Is the project acceptable? Why or why not? Your answer should include an explanation of your treatment of the salvage value, the cost of the feasibility study, and the interest and repayments on the loan.

Posted Date: 3/21/2013 6:38:23 AM | Location : United States







Related Discussions:- Calculate npv and irr of the project, Assignment Help, Ask Question on Calculate npv and irr of the project, Get Answer, Expert's Help, Calculate npv and irr of the project Discussions

Write discussion on Calculate npv and irr of the project
Your posts are moderated
Related Questions
This assignment counts for 40% of the total grade for the subject.  There are 100 marks for the assignment.  Including figures and tables, it should be no more than 10 pages. Yo


prepare an estimate of working capital requirements from the following information 1. project annual sales 1,00000/- 2. selling price Rs. 8/unit 3.percentage of net profit on sale

How to combine two prisms to produce deviation without dispersion ?

Consider two firms producing an identical product in a market where the demand is described by p = 1; 200 - 2Y. The corresponding cost functions are c1 (y1) = y 2 1 and c2 (y2) =


Problem 1 Statistics plays a vital role in almost every facet of human life. Statistics. Explain the applications of statistics in business and management. Defining Stati

I have statistic assignment can do it at 2.30 H, because I don''t have time

A boat is heading across a river at a velocity of 25 mph. The river is flowing downstream at 10 mph. What is the actual velocity of the boat?

A retail store has recently hired you as a consultant to advise on economic conditions. One important indicator that the retail store is concerned about is the unemployment rate.