Capital Budgeting – NBC Institute

MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

Question

Question:
Arkoo Ltd (Arkoo) is planning to invest GH¢5 million in its sound engineering studio with a life span of 10 years. Arkoo charges GH¢5.50 for every compact disc (CD) produced with an associated cost of GH¢4.80. The company plans to produce 8,700,000 CDs each year. Arkoo evaluates all investment opportunities against a discount factor of 21%.

Required:
i) Determine whether the project is viable or not using the Net Present Value (NPV) method.
ii) Calculate the percentage by which the following conditioning factors of Arkoo must change
in order for NPV to be zero.

Selling price (3 marks)

Variable cost (3 marks)

Sales Volume (3 marks)
Initial investment (3 marks)

Answer

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Tags: Capital Budgeting, Discounted Cash Flow, Investment Appraisal, NPV

Topic: Capital Budgeting, Discounted cash flow
Series: MAR 2023

MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

Question

a) Pagsana Company plans to introduce a new product line for production of its local drink in Walewale. The company, therefore, decided to acquire either a semi-automated plant or an automated plant. The relevant data for the two proposed plants are as follows:

Required:
i) Select the appropriate plant on the basis of:

Payback Period (4 marks)
Net Present Value

(7 marks)

ii) Explain TWO (2) advantages of discounted cashflow method of investment appraisal. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash Flow, Discounted Cash Flow, Investment Appraisal, Net Present Value, Payback Period

Topic: Capital Budgeting, Discounted cash flow
Series: NOV 2019

MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

Question

Selling price (3 marks)

Variable cost (3 marks)

Sales Volume (3 marks)
Initial investment (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Budgeting, Discounted Cash Flow, Investment Appraisal, NPV

Topic: Capital Budgeting, Discounted cash flow
Series: MAR 2023

MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

Question

Payback Period (4 marks)
Net Present Value

(7 marks)

ii) Explain TWO (2) advantages of discounted cashflow method of investment appraisal. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash Flow, Discounted Cash Flow, Investment Appraisal, Net Present Value, Payback Period

Topic: Capital Budgeting, Discounted cash flow
Series: NOV 2019

Topic: Capital Budgeting

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MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

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MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

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MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

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MA – Mar 2023 – L2 – Q4a – Discounted cash flow

Determine whether Arkoo Ltd's project is viable using the NPV method.

You're reporting an error for "MA – Mar 2023 – L2 – Q4a – Discounted cash flow"

MA – Nov 2019 – L2 – Q4a – Introduction to capital budgeting

Select the appropriate plant for Pagsana Company using Payback Period and NPV analysis.

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