Part AYou are a banker to Livingstone Thompson Limited, a textile manufacturing company.Livingstone Thompson Ltd. is planning to establish a new factory overseas. The projectrequires an initial investment of £15 million. Livingstone Thompson Ltd. have told youthat the factory will run for six years and then be sold to a local entity. The FinanceDepartment of Livingstone Thompson Ltd. has estimated the following yearly cashflows:Year0ii.iii.12356Cash Flow (£)-30,000,0008,000,0008,000,0008,000,0008,000,0008,000,00014,000,000The Financial Manager of Livingstone Thompson Ltd. has decided that the company'scost of capital of 15% is an appropriate hurdle rate for this project and informed youwho will be providing the finance.i.Calculate the Net Present Value (NPV) for this project.Calculate the Internal Rate of Return (IRR)of this project.Make a recommendation to your department manager concerning whether toprovide finance for this project.

Net Present Value (NPV) = Present value of cash flows - Initial investmentNet Present Value (NPV) is…

art A You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. The project requires an initial investment of £15 million. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year 0 3 Cash Flow (£) -30,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company's wattal 150

art A You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. The project requires an initial investment of £15 million. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year 0 3 Cash Flow (£) -30,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company's wattal 150

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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