1. a project will require an initial investment of $300,000 and will return $75,

Question

1. a project will require an initial investment of $300,000 and will return $75,000 each year for eight years. if taxes are ignored and the required rate of return is 9%, what is the project's net present value? Should comapny proceed with the project?

2.  Products kappa and sigma are joint projects. The joint production cost of the projects is $800. Kappa has a market value of $450 at the split-off point. If kappa is further processed at an additional cost of $600, its markrt value is $1,400. Product sigma has a market value $1,150 at the splitt off point. If product sigma is further processed at an additional cost of $300, it market value is $1,400. Using relative sales value method, calculate the joint product costthat would be allocateed to kappa and sigma. How do you know if one of the products should be further processed?

Explanation / Answer

I can help you out with first part of question.!!

1.Net Present Value = Cash Inflow-Outflow/(1+i)^t

=600000-300000/(1+0.09)^8

=$150559.8839

Company should not proceed with project as it's NPV is just about half it's initial investment.

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