$20 Bonus + 25% OFF
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!
Add File

Error goes here

Question:

RWE Enterprises Pty Ltd is a small manufacturing firm located in Brisbane. RWE is considering setting-up a new plant. The plant has an upfront cost of $3 million. The proposed plant will have a life of 10 years at the end of which it can be sold for an after-tax scrap value of $200,000. The management estimates that the new plant will add 700,000 to after-tax profits during each year of its life. Midway through its life, that is, at the end of 5 years, the plant will have to be refurbished at a cost of $2 million. 

  1. What are the full 10 year cash flows associated with the plant? That is, make a cash flow diagram showing the yearly cash flows from year 0 to 10.
  2. If RWE uses a 10% discount rate to evaluate investments of this type, what is the net present value of the project? What does this NPV indicate about the potential value RWE might create by purchasing the new production line? Explain.
  3. Calculate the internal rate of return and profitability index for the proposed investment. What do these two measures tell you about the project’s viability? Explain.
  4. Calculate the payback period for the proposed investment. Interpret your findings. 

Question 2 (10 marks) 

Jason Katz graduated from University of the Sunshine Coast in December and has started working for Innovative Investments. When Jason arrived at work on Monday morning, he found the following memo on his desk

“To: Jason Katz, Financial Analyst

From: George Adams, CFO

RE: Project Evaluation

Provide an evaluation of two proposed projects with the following cash flow forecasts: 

 

Project A

Project B

Initial Outlay

(275000)

(275000)

Year 1

50000

100,000

Year 2

75000

100,000

Year 3

100,000

100,000

Year 4

125,000

100,000

Year 5

175,000

100,000

The company requires a rate of return on both projects equal to 12%. As you are no doubt aware, we rely on a number of criteria when evaluating new investment opportunities. In particular, we require that projects that are accepted have a payback of no more than three years, provide a positive NPV and have an IRR that exceeds the firm’s discount rate.

Give me your thoughts on these two projects by 9 am tomorrow morning.” 

Jason was not surprised by the memo, for he had been expecting something like this for some time. Innovative Investments followed a practice of testing each new financial analyst with some type of project-evaluation exercise after the new hire had been on the job for a few months.

After re-reading the memo, Jason decided on his plan of attack. Specifically, he would first do the obligatory calculations of payback, NPV and IRR for both projects. Jamie knew the CFO would grill him thoroughly on Tuesday morning about his analysis, so he wanted to prepare well for the experience. One of the things that occurred to Jason was that the memo did not indicate whether the two projects were independent or mutually exclusive. So, just to be safe, he thought he had better rank the two projects in case he was asked to do so tomorrow morning. Jason sat down and made up the following ‘to do’ list:

(a) Calculate payback, NPV and IRR for both projects.

(b) Evaluate the two projects’ acceptability using all three decision criteria (listed above) and based on the assumption that the projects are independent. That is, both could be accepted if both are acceptable.

(c) Rank the two projects and make a recommendation as to which (if either) project should be accepted under the assumption that the projects are mutually exclusive.

Assignment—Prepare Jason’s evaluation for his Tuesday meeting with the CFO by filling out your response

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Managerial Finance. Retrieved from https://myassignmenthelp.com/free-samples/acc511-managerial-finance/tax-profits.html.

My Assignment Help (2020) Managerial Finance [Online]. Available from: https://myassignmenthelp.com/free-samples/acc511-managerial-finance/tax-profits.html
[Accessed 29 July 2021].

My Assignment Help. 'Managerial Finance' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/acc511-managerial-finance/tax-profits.html> accessed 29 July 2021.

My Assignment Help. Managerial Finance [Internet]. My Assignment Help. 2020 [cited 29 July 2021]. Available from: https://myassignmenthelp.com/free-samples/acc511-managerial-finance/tax-profits.html.


MyAssignmenthelp.com is one of the noted service providers that deliver essay help. We provide tailored essay assistance to make sure that student gets online essay help exactly in the way they want it to be written. We at MyAssigemnthelp.com have built teams of consultants, who readily attend every query related to help me writing my essay. We provide essay writing help in forms of tips and steps in order o assist students with tough essay assignments.

Latest Finance Samples

MGB305 Accounting And Finance

Download : 0 | Pages : 6

Answer: Part A According to the question, bank has given loan to Grain Plus Ltd at the rate of 4% which is 1% above Reserve Bank of Australia cash rate. Bank has also added a condition to maintain a minimum balance of 20% of loan amount in its current bank account. Computation of annual interest rate: Particulars Amount in $ Funds Needed (a) 2,40,000 Interest Rate (RBA) (given) 3.00% I...

Read More arrow Tags: Australia Melbourne Computer Science database University of Melbourne Information Technology 

CORPFIN 7101 Managerial Finance

Download : 0 | Pages : 10

Answer: Introduction  This report contains various methods and investment methods which could be used by venture capitalist in its investment functioning. In this report hedge fund has been developed by the troy Dexter who is an affluent venture capitalist in Sydney. This hedge fund has been developed by Troy with a view to create value on the invested amount. In addition to this, investment has been made by troy through its hedge funds ...

Read More arrow

FINC20023 International Financial Management

Download : 0 | Pages : 6

Answers: 1: (Twin Agency Problem) The twin agency problem mainly depicts that two groups act for its own self-interest, and discards any interest of the firm. The main hurdles for the financial globalisation are twin agency problem, where investments in foreign companies are not safe. The twin agency problems are interrelated, where one is directly linked with other. The first agency problem is related to the exploitation, which is condu...

Read More arrow Tags: Australia Stafford Heights Management ECONOMICS University of Queensland Masters in Business Administration 

FINA 6000 Managing Finance

Download : 0 | Pages : 2

Answer:   2017 2016 2015 Equity   4,47,611.00   3,55,369.00   3,03,443.00 Other Liabilities      46,370.00      37,010.00      43,235.00 Total       46,370.00      37,010.00      43,235.00 Total Assets   4,93,981.00   3,92,379.00   3,46,678.00 ...

Read More arrow

BUS704 Corporate Finance

Download : 0 | Pages : 4

Answer: Share repurchase Value Number of share repurchase                    115 Expenses  $    13,325.00 Share price  $          116.00 Shareholder's wealth  $        &nb...

Read More arrow
Next

Still in Two Minds? The Proof is in Numbers!

33845 Genuine Reviews With a Rating of 4.9/5.

student rating student rating student rating student rating student rating
19 Jul 2021

Mechanical Engineering

Assignment: 8 Pages, Deadline: 8 days

Passed my subject because of you. Thank you........................................................................

flag User ID: 2***76 Sydney, Australia

student rating student rating student rating student rating student rating
19 Jul 2021

Healthcare

Essay: 1 Page, Deadline: 17 days

Instructors comments on marking :



The depression rate has been increased by 31% among teenagers in America as a consequence of the excessive us ...

flag User ID: 6***41 Campbell River, Canada

student rating student rating student rating student rating student rating
19 Jul 2021

English

Assignment: 0 Pages, Deadline: 4 days

Grate job on my assignment. I got a 100 on it. thank you. I have two questions? 1)Whats The distance from Clarksville,TN to Dayton, Ohio? What's the ...

flag User ID: 7***74 United States

student rating student rating student rating student rating student rating
19 Jul 2021

Assignment

Essay: 5 Pages, Deadline: 6 days

Great job by an incredible organization that truly goes above and beyond to assist in any matter. I truly thank you again for your help.

flag User ID: 5***89 Hillsborough, United States

student rating student rating student rating student rating student rating
19 Jul 2021

Networking

Programming: 4 Pages, Deadline: 30 days

Very Good Team and they attend to you whenever u need them and make all the changes required as soon as possible.

flag User ID: 6***7 Brisbane, Australia

student rating student rating student rating student rating student rating
19 Jul 2021

It Write Up

Assignment: 4 Pages, Deadline: 16 days

This was short assignment but i was satisfied with the work. I got good grades and passed the assignment. The assignment was overall good. I ordered i ...

flag User ID: 6***34 Canada

student rating student rating student rating student rating student rating
18 Jul 2021

Healthcare

Essay: 4 Pages, Deadline: 6 days

the revised version of the assignment was ok, based on the feedback for all the parts.

flag User ID: 5***77 Australia

student rating student rating student rating student rating student rating
18 Jul 2021

Nursing

Home Work: 4 Pages, Deadline: 4 days

My assignment always done on time sometime before the given time. MY ASSIGNMENT team is very responsive.

flag User ID: 4***34 United States

student rating student rating student rating student rating student rating
18 Jul 2021

Nursing

Assignment: 4.8 Pages, Deadline: 5 days

My Assignment was done very good. Good work and it was delivered on time. Very responsive.

flag User ID: 4***34 United States

student rating student rating student rating student rating student rating
18 Jul 2021

HRM

Thesis: 6 Pages, Deadline: 9 days

YOU WORKED HARD ON THIS ASSIGNMENT AND DID EXACTLY WHAT WAS ASKED. THANKS, AND I CAN'T WAIT FOR YOU TO DO WELL ON THE NEXT WORK.

flag User ID: 4***64 United States

student rating student rating student rating student rating student rating
19 Jul 2021

Mechanical Engineering

Assignment: 8 Pages, Deadline: 8 days

Passed my subject because of you. Thank you........................................................................

flag User ID: 2***76 Sydney, Australia

student rating student rating student rating student rating student rating
19 Jul 2021

Healthcare

Essay: 1 Page, Deadline: 17 days

Instructors comments on marking :



The depression rate has been increased by 31% among teenagers in America as a consequence of the excessive us ...

flag User ID: 6***41 Campbell River, Canada

student rating student rating student rating student rating student rating
19 Jul 2021

English

Assignment: 0 Pages, Deadline: 4 days

Grate job on my assignment. I got a 100 on it. thank you. I have two questions? 1)Whats The distance from Clarksville,TN to Dayton, Ohio? What's the ...

flag User ID: 7***74 United States

student rating student rating student rating student rating student rating
19 Jul 2021

Assignment

Essay: 5 Pages, Deadline: 6 days

Great job by an incredible organization that truly goes above and beyond to assist in any matter. I truly thank you again for your help.

flag User ID: 5***89 Hillsborough, United States

student rating student rating student rating student rating student rating
19 Jul 2021

Networking

Programming: 4 Pages, Deadline: 30 days

Very Good Team and they attend to you whenever u need them and make all the changes required as soon as possible.

flag User ID: 6***7 Brisbane, Australia

student rating student rating student rating student rating student rating
19 Jul 2021

It Write Up

Assignment: 4 Pages, Deadline: 16 days

This was short assignment but i was satisfied with the work. I got good grades and passed the assignment. The assignment was overall good. I ordered i ...

flag User ID: 6***34 Canada

student rating student rating student rating student rating student rating
18 Jul 2021

Healthcare

Essay: 4 Pages, Deadline: 6 days

the revised version of the assignment was ok, based on the feedback for all the parts.

flag User ID: 5***77 Australia

student rating student rating student rating student rating student rating
18 Jul 2021

Nursing

Home Work: 4 Pages, Deadline: 4 days

My assignment always done on time sometime before the given time. MY ASSIGNMENT team is very responsive.

flag User ID: 4***34 United States

student rating student rating student rating student rating student rating
18 Jul 2021

Nursing

Assignment: 4.8 Pages, Deadline: 5 days

My Assignment was done very good. Good work and it was delivered on time. Very responsive.

flag User ID: 4***34 United States

student rating student rating student rating student rating student rating
18 Jul 2021

HRM

Thesis: 6 Pages, Deadline: 9 days

YOU WORKED HARD ON THIS ASSIGNMENT AND DID EXACTLY WHAT WAS ASKED. THANKS, AND I CAN'T WAIT FOR YOU TO DO WELL ON THE NEXT WORK.

flag User ID: 4***64 United States

Order on the go!

Say hello to our new app

callback request mobile
Have any Query?