Lynx Limited is planning to invest 600,000 in a new project. At the end of...
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Lynx Limited is planning to invest 600,000 in a new project. At the end of 4 years the project's assets will be sold for 120,000. Net operating cash inflows from the project are as follows: Lynx Limited is planning to invest 600,000 in a new project. At the end of 4 years the project's assets will be sold for 120,000. Net operating cash inflows from the project are as follows: 5a) Why should companies appraise projects before investing? (4 marks) 5b) Calculate the Accounting Rate of Return for the above investment ( 6 marks) 5c) The Net Present Value method of Capital Investment Appraisal uses a 'discount rate'. i) Discuss the meaning of a discount rate and its importance? ( 6 marks) ii) What level of discount rate would you use given the uncertain events that are taking place in the world? (2 marks) iii) Discuss the relationship between the discount rate and the Net Present Value of a project (3 marks) 5d) You are a manager, which method of capital investment appraisal do you consider the most useful and why? (4 marks)
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