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Base NPV and Adjusted NPV

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Base NPV and Adjusted NPV

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
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  • November 21, 2019 at 10:03 am #553267
    tawandakamutatari
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Windmill Fertilizers Ltd is considering a capital project requiring an outlay of $15 million. It is expected to generate a net cash inflow of $3,75 million for 6 years. The opportunity cost of capital is 18%. Windmill Fertilizers can raise a term loan of $10 million for the project. The term loan will carry an interest rate of 16% and would be repayable in 5 equal instalments, the first instalment falling due at the end of the second year. The balance amount required for the project can be raised by issuing equity. The issue cost is expected to be 8%. The tax rate for the company is 50%.
    (i.) What is the base case NPV?
    (ii) What is the adjusted net present value?

    November 21, 2019 at 1:32 pm #553299
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    There is no point in simply setting a test question and expecting someone to provide an answer!!

    You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about.

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