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Question 3 You are the finance manager of Wide WLL based in...

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Finance

Question 3

You are the finance manager of Wide WLL based in Doha. You are evaluating two capital investment projects in the UK which may assist the company in achieving its business objectives. Both projects will require an initial investment of 500,000 in plant and machinery. The expected cash flows of the two projects are as follows:

Year

Humber Project

Avon Project

1

60,000

220,000

2

90,000

220,000

3

140,000

50,000

4

210,000

50,000

5

300,000

50,000

6

140,000

50,000

7

100,000

200,000

The cost of capital of Wide WLL is 10%.

Required:

  1. For both projects calculate the NPV and the IRR

  1. If both projects are mutually exclusive, advise Wide WLL which project should be undertaken

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