What is the annual net cash inflow

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A company is considering making a capital investment in developing a cattle farm in East Coast, Guyana. They intend to invest US$1,000,000 of which 60% would be equity at 15% cost of capital and 40% debt with the cost of debt being 8%. They expect that they would earn net income of US$250,000 per annum for the next 5 years. Annual depreciation is estimated at US$40,000 per annum.

Problem i) What is the weighted cost of capital

Problem ii) What is the annual net cash inflow

Problem iii) Based on NPV and IRR analysis should the project be undertaken

Problem iv) What other factor should the company consider before making this making this investment

Reference no: EM132816029

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