This course provides detailed critical treatment of the theory and practice of financial management within organizations. Topics covered include financial modeling, breakeven analysis investment decision-making (NPV, IRR, etc.), capital budgeting and capital structure, working capital management, analysis of financial statements, and risk analysis.
Regarding investment decision making, there are techniques that are often applied to make financial investment decisions. These techniques include those that are sophisticated such as Net Present Value (NPV), Internal Rate of Return (IRR) and Profitability Index (PI) and those that are not sophisticated such as payback period and accounting rate of return. This assignment requires students to use the NPV technique to make investment decisions.
Use the following information to answer the questions that follow.
RAK manufacturing company plans to invest in plant and equipment to expand its operating activities to be ready for Dubai EXPO 20-22.The plant and equipment will be useful for five (5) years only.
The plant and equipment will cost $110,000. RAK expects to receive the following net cash flows in the next five years.
|YEAR||NET CASH FLOWS
The discount rate is expected to be 12%.
QUESTION 1 14 marks
QUESTION 2 11 marks
PAYBACK PERIOD THECHNIQUE
Using payback period method RAK expects to recover its initial investment of $110,000 in three (3) years.