Reference no: EM13486367
Exam Standard Question
Sleet plc is preparing its capital budget and is considering four projects. Financial details of these projects are as follows.
|
|
Project A
|
Project B
|
Project C
|
|
Initial investment
|
£750,000
|
£800,000
|
£900,000
|
|
Net present value
|
£370,000
|
£430,000
|
£400,000
|
These three projects are divisible and cannot be deferred or repeated.
Project D
This is an essential investment in equipment to purify the toxic waste of Sleet plc. An initial investment of £1,000,000 is expected to lead to savings by avoiding fines and waste disposal costs. Forecast annual volumes of toxic waste are as follows:
|
Year
|
1
|
2
|
3
|
4
|
|
Volume (units)
|
15,000
|
18,000
|
21,600
|
25,900
|
Savings will be £20 per processed unit. Fixed operating costs will be £53,000 per year and variable operating costs will be £1 per processed unit. These values do not take account of anticipated inflation of 4% per year in savings and 5% per year in both fixed and variable operating costs.
Other information
The directors of Sleet plc have decided that capital investment funds will be limited to £3,000,000. They have agreed that Project D is essential and must be undertaken. Sleet plc has a nominal (money) cost of capital of 10%.
Required:
(a) Calculate the net present value of Project D and comment on your findings.
(b) Determine the best way for Sleet plc to invest the available capital investment funds and prepare an optimum investment schedule for the company.
(c) Discuss the reasons why capital investment funds may be rationed.
(d) Describe the limitations of accounting rate of return as an investment appraisal method.
|
Find the total rotational kinetic energy of the two han
: Big Ben, the Parliament tower clock in London, has an hour hand 2.70 m long with a mass of 300 kg, and a minute hand 4.20 m long with a mass of 100 kg, Calculate the total rotational kinetic energy of the two hands
|
|
Find the horizontal and vertical forces
: A 16.0-m uniform ladder weighing 480 N rests against a frictionless wall. Find the horizontal and vertical forces the ground exerts on the base of the ladder when an 820-N firefighter has climbed 3.90 m along the ladder from the bottom
|
|
How many moles of air are in the balloon
: To the Amazon (EPM = Evil Physics Monkey) With his limited resources the EPM decides that the best way to get to his chosen destination (the Amazon rain forest) is by hot air balloon. How many moles of air are in the balloon
|
|
Compute the kinetic energy of the bullet
: A bullet is shot into a block of ice at 0 degrees Celsius. It comes to rest and melts .005 kg of ice. What was the Kinetic Energy of the bullet
|
|
Determine the best way for sleet plc to invest
: Determine the best way for Sleet plc to invest the available capital investment funds and prepare an optimum investment schedule for the company.
|
|
Write down comprehensive problems
: write down Comprehensive Problems.
|
|
What is overall storyline and setting of television program
: In social psychology, one of the main ways of studying how people interact with each other and their group behavior is through observation. One aspect of observation is through understanding the media. We live in a world of mass media, with blockbust..
|
|
What makes people virtuous
: What makes people virtuous? Are they born that way, or do they have to be taught? If you believe they were born that way, what evidence or proof can you cite in support of your belief? If people must be taught to be virtuous, what methods should be u..
|
|
Do you believe that moderation is always a virtue
: Do you believe that moderation is always a virtue? Should people always strive to reach the mean between two extremes? Why, or why not? What about people with strong beliefs, such as advocates of the prolife or prochoice positions on abortion?
|