PLEASE SKIP IF YOU ALREADY DID THIS OTHERWISE DOWNVOTE. THANK YOU. I WILL UPVOTE Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment wouldrequire an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-year life with no scrap value at the end of its life. It has been estimated that the new equipment would increasethe company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% ANSWERP1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 perbond with interest payable semi-annually for ten years. The company is subject to 32% income tax.Determine the Cost of Capital (k)PROBLEM 4Solution:Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company ONLYshould push the project or not. Explain your answer.

This answer is for only Problem no. 4 Here total cost of new equipment would be =417,860+40000…

Answered: Problem 4. Refer to problem no. 3.…

Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answer.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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PLEASE SKIP IF YOU ALREADY DID THIS OTHERWISE DOWNVOTE. THANK YOU. I WILL UPVOTE

Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would
require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-
year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase
the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% ANSWER
P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per
bond with interest payable semi-annually for ten years. The company is subject to 32% income tax.
Determine the Cost of Capital (k)
PROBLEM 4
Solution:
Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company ONLY
should push the project or not. Explain your answer.

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