Gardial Fisheries is considering a new project. Assume that the project's cost of capital is...
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Finance
Gardial Fisheries is considering a new project. Assume that the project's cost of capital is 10%. The projects expected net cash flows are as follows:
| Expected Cash flows (M$) | |
| Time | Project A |
| 0 | -390 |
| 1 | -350 |
| 2 | 290 |
| 3 | 190 |
| 4 | 750 |
| 5 | 800 |
| 6 | -160 |
| 7 | 120 |
| 8 | 130 |
| 9 | 200 |
| 10 | 150 |
|
|
|
a) Calculate the projects NPV, IRR, MIRR, and profitability index (PI).
b) CEO wants you to explain which measure is the best one to make an investment decision. (e.g., NPV, IRR, MIRR or PI) (1-3 sentences, you do not need to do any calculations.)
c) CEO thinks that IRR is a better measure than MIRR. Do you agree? (1-3 sentences, you do not need to do any calculations.)
d) CEO wants to know the number of years (the amount of time) required to recover Project As cost from its operations. Which measure would you use to answer the CEOs question? (1-3 sentences, you do not need to do any calculations.)
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