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Hi there can you help to determine, on the basis of its Net Present Value (NPV), whether the investment should be favourably considered for
Hi there can you help to determine, on the basis of its Net Present Value (NPV), whether the investment should be favourably considered for acceptance or not.
INFORMATION
Beira Ltd plans an investment in non-current assets costing R3 000 000. The non-current assets will have a four-year life, with the following expected net cash inflows:
Year 1 R1 000 000
Year 2 R1 400 000
Year 3 R850 000
Year 4 R820 000
Working capital amounting to R200 000 will be required at the start of the project. All the working capital will be recovered at the end of year 4. The expected scrap value of the non-current assets at the end of year 4 is R400 000. The cost of capital is 12%.
