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NPV and Other Criteria
Waddington International Inc. has $20 million to invest. It is considering whether to build a new factory in Western Canada. The land and the building will cost $15 million payable today. The machines and equipments will cost another $5 million but payable at the end of the first year. It is expected that the factory will generate cash flow of $3 million per year for the next 15 years. The company's cost of capital is 10%.
(a) Calculate the Net Present Value (NPV) and the internal rate of return (IRR) of the Western Canada project.
(b) Calculate the NPV and PI of each project.
(c) Which project or projects should the company choose and why?
CAPITALISATION RATE=0.01 EARNINGS PER SHARE(E)=10 ASSUME RATE OF RETURNS ON INVESTMENTS (R):15
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Hi, what is your time limits on providing solutions
Q. Show the Advantages of IRR Method? Advantages of IRR Method:- (i) Similar to the other DCF methods IRR methods as well take into consideration the time value of money.
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