Calculate the projects net present value

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Reference no: EM13878804

Trigger PLC is a manufacturer of computer components and a decision is required on a proposal to invest £1,800,000 on a new machine in order to move into a new market for components. The financial details are as follows:

Initial investment: £1,800,000

Life of project: 10 years Net cash flows:

years 1-6 £500,000 per year years 7-10 £300,000 per year

Residual value £500,000

The company has a target rate of return of 11% and a payback criterion of 4 years.

(a) Calculate the payback period.

(b) Calculate the project's net present value.

(c) Advise the company on whether it should proceed with the project. Provide reasons for your advice.

Reference no: EM13878804

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