Reference no: EM132232310

insta foods ltd has won a 4 year contract to supply a major supermarket chain with salads and sandwiches. the initial costs involved in obtaining the contract were $700000. the following information relates to the contract: in the first year 13500 products a week will be supplied, at an average selling price of $0.73.n the first year 13500 products a week will be supplied, at an average selling price of $0.73 each. in the second and third year 14000 products a week will be supplied, at an average selling price of $0.75 each. in the forth year 14500 products a week will be supplied, at an average selling price of $0.77 each. in the year one and two , the running costs excluding debenture interest are expected to be $5300 a week. in the year three and four , the running costs excluding debenture interest are expected to be $5700 a week. assume 52 weeks in a year. the cost of capital is 10%. the initial amount required for the project will be raised through either the issue of ordinary shares or by issuing 5% debenture repayable in forth year. the policy of the company is not to invest in a project where the accounting rate of return is less than 10%. the directors of the company want to know whether they should invest in this opportunity or not. for this they want you to calculate and explain the effect and importance of some of the project appraisal methods which are mentioned below: net present value benefit cost ratio internal rate of return modified internal rate of return payback period discounted payback period. the directors should also know whether they have to mobilize the capital required for the project by issuing shares or debentures. write a report on feasibility of the project.