Description
All the question details are attached. Please reach through it then bid. In case of any inquiry please let me know.
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Attached.
Computation of NPV
Given that the cost of capital=14%
Initial outlay= $2000,000
Annual cash flow= $500,000
cash
Year
flow
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000
8 500,000
9 500,000
10 500,000
Present Value (PV)
P{1-(1+r)^-n}/r
500,000{1-(1.14)^-10}/.14
500,000(0.7303)/.14
=0.7303/.14=5.2164*500,000
Present value= $2,608,214
Net present value= 2608214-2000000
= $608,214
Computation of IRR
IRR= r1+ NPV1*(r2-r1)
NPV1-NPV2
Where r1= lower cost of capital
r2= higher cost of capital
npv1= npv at r1
npv2= npv at r2
Therefore taking lower cost of capital to be= 15%
And the higher capital be= 25%
Using the formula, npv at 15%= {500000*(1-0.2472)}/0.15= $250938.43
Pv at 15%= $2509385.3 NPV=509385.3
and thus ;. At r=25%
{500,000*(1-0.1073)}/0.25
=$1785251.635 and NPV = -214748.36
So, 0.15+(509385.3*0.1)
509385.3+214748.36
0.15+50938.53
724134
TRUE
IRR is approximately equals to 22.03%
Payback period
Year
Cash
flow
Discount
ed cash
flow
Cumulative cash
flow
0
1
2
3
4
5
6
-2000000
500000
500000
500000
500000
500000
500000
2000000
438596
384734
337486
296040
259684
227793
2000000 -1561404 -1176670 -839184 -543144 -283460
-55667
Payback period= 6+ (55667/199819)
=6.2 years
7
8
9
10
500000
500000
500000
500000
199819
175279
153754
134872
Name
Institutional Affiliation
Course
Date
In the recent past, the president of EEC convened a meeting to introduce the biggest
supplier of components part had requested them in respect to the possibility of purchasing of
suppliers. The president, therefore, demanded that we analyze the opportunities to procure the
suppliers
Information’s Necessary for Analyzing the Investments Opportunities
It would be essential for us to research on potential investments as the EEC greatest
interest is to conduct a financial analysis for prospective investments which include the firm's
non-financial features of investments. The studies would give out data's such as economic
analysis which is necessary for ascertaining incrementally which means that additional cash-flow
is connected to investments. More so, the financial reports would bring out a clear picture of both
short and long-term implication of the times as well as investments in specific durations which
will reveal finances to pay off.
Workers are expected to evaluate non-financial characteristics be...