Advise bidii ltd on whether to proceed with the investment

Assignment Help Financial Accounting
Reference no: EM132613536

Bidii Ltd is considering investing in a plant which is expected to operate for the next four years after which it will have no salvage value. The plant will cost Sh.5million. Annual tax depreciation of 25% will be allowed in respect of the expenditure.

Revenue from the plant will be Sh.7million per annum for the first two years, and Sh.5million per annum thereafter. Incremental costs will be Sh.4 million every year. Bidii Ltd pays corporation tax at 30% and has a cost of capital of 10%.Assume all cash flows occur at the end of the year to which they relate, except for initial cost which is incurred at the beginning of year on.

Required:

Question 1: Use the NPV method and advise Bidii Ltd on whether to proceed with the investment.

Reference no: EM132613536

Questions Cloud

Determining the annual interest rate : What must the annual interest rate be in order to achieve your goal if interest is compounded monthly?
How or whether will affect the value of the company : The CFO believes KIS should use the extra cash to pay a special dividend. Discuss how or whether it will affect the value of the company.
Determining the situations horizontal analysis : In which situations horizontal analysis are more suitable than vertical analysis?
Control phase of six sigma dmaic project : Execute the control phase of the Six Sigma DMAIC project. Determine how to monitor and control improvements.
Advise bidii ltd on whether to proceed with the investment : Bidii Ltd is considering investing in a plant which is expected, Use the NPV method and advise Bidii Ltd on whether to proceed with the investment.
What is the dividend growth rate that they are anticipating : If investors require a 12% return on this stock, what is the dividend growth rate that they are anticipating?
What net amount is recognised in pattinson co profit : What net amount is recognised in Pattinson Co's profit or loss in the year ended 31 December, 20X8 in respect of the property?
Prepare career profile for specific career : Select one of the career opportunity areas. Prepare a career profile for a specific career that falls within the career opportunity area you selected.
Calculate the unlevered present value : Calculate the present value of the expected interest tax shields. Why is APV a preferable method to WACC in this situation? How do their assumptions differ?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd