A project of equipment purchase of Mekong Company Ltd. has the estimated data as follows:

The cost of equipment is USD 12,000, the cost for transportation and installation is USD 1,000 USD. The asset is depreciated according to a straight line depreciation scheme within 5 years. It is expected that the project can produce and sell 7,500 units of product at the price of USD 2 per unit, for the first year. The operating costs for the first year (excluding depreciation) are estimated to be USD 10,000. Revenues and operating costs are supposed to grow at the annual rate of 7% and 5% respectively. The pre-tax income from the asset liquidation after 5 years is estimated to be USD 3,000. The project life is 5 years. The cost of capital of the project is 12% per annum. The corporate income tax rate is 28%. In addition, the requirement for incremental net working capital (NWC) of the project is:

Please do the project appraisal with the criteria of NPV and PP.

Problem 2: In 2012, Sunshine Company Ltd considers the possibility of investing in a laptop producing factory with 100% equity. The company hires a project consultancy firm to do the pre-feasibility study with the total fee of USD 50,000.

Sunshine owns a ready plant in the ABC industry zone. The company is currently renting out the plant with USD 115,500 of rental per year. If the company decides to accept the above project, it will stop the rental contract and use this plant for project production.

The cost of machinery purchase is USD 5,700,000. The cost for transportation and installation is USD 10,000. The time of using the machinery is 5 years in total. The machinery is depreciated in accordance with a...

...budgeting? a Will an investment generate adequate cashflows to promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net present value? d Will an investment have an adverse effect on the environment? 3 Which of the following is not considered when using the payback period to evaluate an investment? a The profitability of the investment over its entire life. b The annual net cash...

...the syllabus for examples.The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds up to 100. You are strongly encouraged to use spreadsheets. Refer to Note on Sample CashFlow Template.
Question 1
(5 points) The project with the highest IRR is always the project with the highest NPV.
Your Answer | | Score | Explanation |
True | | | |
False | ✔ | 5.00 | Correct. Try now to...

...or 3.03%
3. Consider the following monthly cashflows (see the diagram below):
X
Today
Z
X
Z
X
Z
1
2
3
4
19
20
Cashflows of an amount X are made for months 1, 3, 5, …, 17 and 19 (the ten oddnumbered months) and cashflows of an amount Z are made for months 2, 4, 6, …, 18
and 20 (the ten even-numbered months). The APR is 6% and is compounded on a
monthly basis....

...Projecting CashFlow
Projecting cashflow is a vital aspect of managing a business. Cashflow covers expenses, which is why start-ups often seek financing or loans--to provide a base of capital to fund the business while waiting for cashflow. Here is how to project your cashflow.
Estimating the incremental cashflow...

...CONSTRUCTION OF FREE CASHFLOWS A PEDAGOGICAL NOTE. PART I
Ignacio Vélez-Pareja ivelez@javeriana.edu.co Department of Management Universidad Javeriana Bogotá, Colombia Working Paper N 5
First version: 5-Nov-99 This version: January 2001
This paper can be downloaded from the
Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=196588...

...7 – Discounted CashFlow Techniques page 247
A brief tutorial on Excel financial functions (problems to follow)
You may find the following Excel, built-in financial functions helpful when analyzing the problems below. (To access these functions, select Insert, Functions, and choose Financial.)
=PV(rate, nper, pmt, fv, type) returns the present value of a series of cashflows.
=FV(rate, nper, pmt, pv, type)...

... Explain.
Our basic principle of stock valuation is that the value of a share of stock is simply equal to the present value of all of the expected dividends on the stock. According to the dividend growth model, an asset that has no expected cashflows has a value of zero, so if investors are willing to purchase shares of stock in firms that pay no dividends, they evidently expect that the firms will begin paying dividends at some point in the future.
2....

...In finance, the discounted cashflow (DCF) analysis is a method of valuing a project, company or asset using the concepts of time value of money (Wikipedia, 2004). Three inputs are required to use the DCF, also called dividend-yield-plus-growth-rate approach, include: the current stock price, the current dividend, and the marginal investor’s expected dividend growth rate. The stock price and the dividend are east to obtain, but the expected growth rate is...