Serdang Corp. is considering an engineering project that requires an investment of RM220,000 and is expected to...

50.1K

Verified Solution

Question

Finance

Serdang Corp. is considering anengineering project that requires an investment of RM220,000 and isexpected to generate the following stream of payments (income) inthe future.
                         Year         Payment
                          1             RM63,000
                          2             RM69,500
                          3             RM32,900
                          4             RM79,750
                          5             RM62,400
                          6             RM38,550
a.   If the cost of capitalis 15%, does the present value of expected cash inflows exceed thevalue of the investment that has to be made today?
b.   Use linearinterpolation method to find the interest rate at which the companywould be just indifferent to the project.
c. Find the discounted payback period.

Answer & Explanation Solved by verified expert

4.3 Ratings (1074 Votes)

a Calculation of present value of cash inflows Year Cash inflows PVF 15 PV 1 63000 0869565217 5478261 2 69500 0756143667 5255198 3 32900 0657516232 2163228 4 79750 0571753246 4559732 5 62400 0497176735 3102383 6 38550 0432327596 1666623 TOTAL 22225426 Since investment to be See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Serdang Corp. is considering anengineering project that requires an investment of RM220,000 and isexpected to generate the following stream of payments (income) inthe future. Year Payment 1 RM63,000 2 RM69,500 3 RM32,900 4 RM79,750 5 RM62,400 6 RM38,550a. If the cost of capitalis 15%, does the present value of expected cash inflows exceed thevalue of the investment that has to be made today?b. Use linearinterpolation method to find the interest rate at which the companywould be just indifferent to the project.c. Find the discounted payback period.