Assign
Question 1 (5 marks): Assume you are the finance manager of Almanor Company, and the company
is considering investing in one of the three projects. The life for both the Projects X, M and Project Y
is 5 years. Project X costs OMR. 20500, Project M costs OMR. 20500 and Project Y costs OMR.20500.
The discount rate/cost of capital is 4.15%.
Required: Use the following techniques to help company to decide which Machine is better and
justify why?
a)
Payback period
b)
Discount payback period
c)
Net Present Value
d)
Present value index -Profitability index.
Year
Project X
Project Y
Project Z
1
7865
3748
8752
2
4567
7609
8393
3
9676
4628
4508
4
7292
8905
7836
5
9900
9904
8287
Question 2 (5 marks): The company capital structure consists of debt 230000 at 6.45%, preferred
stock 260000 at 15.40% and common stock 170000 at 11.33%, calculate and define the company’s
weighted average cost of capital
…