Calculation of npv of blackwater plc, Financial Management

Assignment Help:

BLACKWATER PLC

(a) Calculation of NPV

EV = (0.3 × 0.50) + (0.5 × 1.40) + (0.2 × 2.0)

   = 0.15 + 0.70 + 0.40 = 1.25 (i.e.) $ 1.25m

To conclude the NPV of the project Blackwater must weigh the present value of the costs incurred that is the outlay and the increased production costs against the benefits in the form of the two sets of tax reliefs relating to the increased operating costs and to the writing-down allowance and also the present value of the fines avoided. These are put out in the following table.

2013_BLACKWATER PLC.png

Since the negative NPV surpass the expected present value of the fines ($1~250m) over the same period it appears that the project is not viable in financial terms (that is ) it is cheaper to risk the fines.


Related Discussions:- Calculation of npv of blackwater plc

Describe the functions of controller, Q. Describe the Functions of Controll...

Q. Describe the Functions of Controller? (1) Planning and budgeting: - It comprises capital expenditure planning, profit planning, budgeting, inventory control, sales forecasti

Deficiency in design, Deficiency in Design - This exists when a control ess...

Deficiency in Design - This exists when a control essential to meet the control objective is missing or an existing control isn't properly designed so that even if control operates

What interest rate is required to yield a balance, Q.  A sum of $2,500 is d...

Q.  A sum of $2,500 is deposited in a bank account that pays 5.25% interest compounded weekly. How long will it take for the deposit to double?  How long will it take you to accrue

Debentures, A 16% debenture of R5 000 is redeemable at a premium of 10% aft...

A 16% debenture of R5 000 is redeemable at a premium of 10% after 5 years. The fair rate of return on similar debentures is 14% before tax. Calculate the present value of the capit

Bid-ask quotes, As the cash manager of your company, you wish to buy $1,0...

As the cash manager of your company, you wish to buy $1,000,000 in 30-day Treasury bills. You obtain the following bid/ask quotes from three dealers:

Explain about opportunity cost of capital, Explain about opportunity cost o...

Explain about opportunity cost of capital Risk free rate compensates for opportunity lost and risk premium compensates for risk. It can also be known as the 'opportunity cost o

State the example to calculate the present value, State the Example to calc...

State the Example to calculate the present value 2, 00,000 $ is the amount which you require after 20 years for your retirement. How much must you invest now at 5% per annum co

What are the reasons for mergers and acquisitions, Reasons for mergers an...

Reasons for mergers and acquisitions The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile. R

Financial management, Financial Management: Financial management is, in...

Financial Management: Financial management is, in its most basic interpretation, the management of costs against revenue. Other management initiatives, such as marketing, are d

Define the term- mergers and takeovers, Define the terms- Mergers and takeo...

Define the terms- Mergers and takeovers The terms takeovers and mergers are inter-related. When a company attains the majority of shares of another company, acquired company is

Write Your Message!

Captcha
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