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Fundamentals of Investing - PDF

   

Added on  2021-04-17

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Running head: FUNDAMENTALS OF INVESTINGFundamentals of InvestingName of the Student:Name of the University:Authors Note:
Fundamentals of Investing - PDF_1

FUNDAMENTALS OF INVESTING1Table of ContentsQuestion 1:.................................................................................................................................21. Calculating Net present value method and a required rate of return of 8% to determine,which project should the Company accepted:............................................................................22. Calculating payback period for each project and depicting which project should beaccepted by the company:..........................................................................................................3Question 2:.................................................................................................................................51. Sketching cash inflow and outflow of different options presented by the productionmanager:.....................................................................................................................................52. Calculating net present value of different options and make recommendations for thecompany:....................................................................................................................................6Question 3:.................................................................................................................................71.a Allocating joint cost of the two products soda and chlorine with the help of sales value atsplit off method:.........................................................................................................................71.b Allocating joint cost of the two products soda and chlorine with the help of physicalmeasure method:........................................................................................................................82. Allocating joint cost of the two products soda and chlorine with the help of net realizablemethod:.......................................................................................................................................83. Depicting the gross margin for each product under each of the three methods:....................9Reference and Bibliography:....................................................................................................10
Fundamentals of Investing - PDF_2

FUNDAMENTALS OF INVESTING2Question 1:1. Calculating Net present value method and a required rate of return of 8% todetermine, which project should the Company accepted:YearProject ADiscounting ratePV0 (11,000.00) 1.00 (11,000.00)1 1,000.00 0.93 925.93 2 2,000.00 0.86 1,714.68 3 3,000.00 0.79 2,381.50 4 4,000.00 0.74 2,940.12 5 5,000.00 0.68 3,402.92 NPV 365.14 YearProject BDiscounting ratePV0 (11,000.00) 1.00 (11,000.00)1 5,000.00 0.93 4,629.63 2 4,000.00 0.86 3,429.36 3 3,000.00 0.79 2,381.50 4 2,000.00 0.74 1,470.06 5 1,000.00 0.68 680.58 NPV 1,591.12 The overall calculation of NPV mainly helps in identifying the financial viability ofthe project, which could help in improving financial improvements of the company. The useof NPV valuation could helpful in detecting financial viability of the project and allowmanagement to make adequate investment decisions. From the overall valuation of NPV theoverall financial viability of Project B can be identified, as it portrays the higher net presentvalue. However, the required rate of return of 8% mainly helps in depicting the financialperformance of the project, which in turn helps in discounting the cash inflow. Thisdiscounting measure has mainly allowed the company to detect that project B could provide aNPV of 1,591.12, while project A provides 365.14 value. Hence, it could be understood that
Fundamentals of Investing - PDF_3

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