BAF 2104: FINANCIAL MANAGEMENT 1 CAT
QUESTION ONE
A company is considering an investment proposal to install new milling controls. The project will cost Kes50,000,000. The facility has a life expectancy of five years and no salvage value. The company’s tax rate is 40%. The estimated cash flows from the proposed investment proposal are as follows:
Year CF Kes 000
1 13,000
2 14,000
3 18,000
4 23,000
5 25,000
Compute:
Ans 1. ARR (Accounting rate of Return is 54.32%
Ans 2.
Discounted payback period is approximate 2 years and 3 months.
Ans.3 Since NPV is positive management can invest in the project. And project is feasible.
BAF 2104: FINANCIAL MANAGEMENT 1 CAT QUESTION ONE A company is considering an investment proposal to...
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