Funding the project The initial investment of P950 000 000 will be funded by...
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Finance
Funding the project
The initial investment of P950 000 000 will be funded by a rights issue at the beginning of January 2022. The realisable value for the plant and equipment is estimated at P630 000 000. This amount will be repaid in full to South Africa. In December 2021 the Royal ltd announced a rights issue of 1 for 4 to fund the proposed P950 000 000 capital investment project. The proposal for the new Magazine was accepted a week ago. Royal ltd would like to proceed without delay. The company will temporarily reduce the dividend growth rates during the development stage of the project.
Investment criteria
Criterion 1
T Royal ltd assesses international projects using the NPV criterion. A risk adjusted discount rate of 12% is used.
Criterion 2
The royal requires international projects to generate an accounting rate of return of at least 25% per year. ARR is defined as follows:
Average accounting profit before interest and taxes /average annual investment
1. Evaluate the project using the NPV criterion
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