Sylvan Forests Ltd is analysing a new paper product with the following after-tax cash flows: YEAR CASH FLOW 0 -200,000 1 60,000 2 64,000 3 64,000 4 68,000 5 68,000 Sylvan...

60.1K

Verified Solution

Question

Finance

Sylvan Forests Ltd is analysing a new paper product with thefollowing after-tax cash flows:
YEAR
CASH FLOW
0
-200,000
1
60,000
2
64,000
3
64,000
4
68,000
5
68,000
Sylvan Forests require a return of 15% on projects with thislevel of risk.
What is the payback period for this project?
What is the net present value of this project?
Sylvan Forests’ CFO says he believes the IRR of this project iseither 14.03% or 18.12%. Without doing any computations, which ismore likely to be correct and why? (1 mark)
Prove your answer to part c – show all computations (orcalculator inputs).
Should Sylvan Forests Ltd proceed with this project? Clearlystate the criteria you used to make this decision.

Answer & Explanation Solved by verified expert

4.1 Ratings (787 Votes)

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

Sylvan Forests Ltd is analysing a new paper product with thefollowing after-tax cash flows:YEARCASH FLOW0-200,000160,000264,000364,000468,000568,000Sylvan Forests require a return of 15% on projects with thislevel of risk.What is the payback period for this project? What is the net present value of this project? Sylvan Forests’ CFO says he believes the IRR of this project iseither 14.03% or 18.12%. Without doing any computations, which ismore likely to be correct and why? (1 mark)Prove your answer to part c – show all computations (orcalculator inputs). Should Sylvan Forests Ltd proceed with this project? Clearlystate the criteria you used to make this decision.

YEAR	CASH FLOW
0	-200,000
1	60,000
2	64,000
3	64,000
4	68,000
5	68,000