Hi can you please help me on this particular question:
Year 1 Year 2 Year 3
$m $m $m
Profit before interest and tax 3 2.7 2.4
Asset base 24 25 26
Special purpose machine (proposed project)
Capital expenditure in year 1 and 2, followed by operating cash flow in year 3:
Year 1 Year2 Year3 NPV
$m $m $m $m
-.5 -.5 2 .634
I was thinking that in year 1 profit will reduce by .5 and asset increase by .5 to give ROI of 10.6%
Target ROI is 10%
The question is asking for ROI for each year?
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ROI calculation with special project
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