Ba515 - financial manegement assignment what is the

Question

FINANCIAL MANEGEMENT ASSIGNMENT-

Question 1: What is the intrinsic value of a cochlear share if your required rate of return is 16% p.a?

Question 2: a) Estimate the cash flows for the project. Tabulate your answer.

Year	0	1	2	3	4
Prices	65,000
Increases Inventory	37,500
Increases in Sales		150,000	150,000	150,000	150,000
Cost of Sales		80,000	80,000	80,000	80,000
Final Sales					10,000
Net Cash Flow
Discount Factor	1	0.89286	1.69005	2.40183	3.03735
Present Value	(27,500)	205,357	388,711	552,420	728,964

b) Calculate the NPV for the project. Should the project be accepted?

Question 3: Option A

Year	Initial Cost	Annual Cash Inflows	Annual Cash Outflows	Cost of Sales	Net Cash Flow	Present Value Factors	Present Value
0	(160,000)				(160,000)	1	(160,000)
1		75,000	35,000		40,000	0.90097	36,038.8
2		75,000	35,000		40,000	1.71279	68,511.6
3		75,000	35,000		40,000	2.44434	97,773.6
4		75,000	35,000	60,000	-20,000	3.10361	-62,072.2
5		75,000	35,000		40,000	3.69778	147,911.2
6		75,000	35,000		40,000	4.23333	169,333.2
7		75,000	35,000		40,000	4.71609	188,643.6
8		75,000	35,000		40,000	5.15128	206,051.2

Option B

Year	Initial Cost	Annual Cash Inflows	Annual Cash Outflows	Cost of Sales	Net Cash Flow	Present Value Factors	Present Value
0	(227,000)				(227,000)	1	(227,000)
1		80,000	30,000		50,000	0.90097	45,048.5
2		80,000	30,000		50,000	1.71279	85,639.5
3		80,000	30,000		50,000	2.44434	122,217
4		80,000	30,000		50,000	3.10361	155,180.5
5		80,000	30,000		50,000	3.69778	184,889
6		80,000	30,000		50,000	4.23333	211,666.5
7		80,000	30,000		50,000	4.71609	235,804.5
8		80,000	30,000		50,000	5.15128	257,564

Compute the following:

I. Net Present Value

II. Profitability Index

III. IRR for each option.