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Luca Group. is considering investing in one of two possible projects (A & B) that will involve the development of a new production line: Corporate Finance Assignment, ICD, Ireland

University Independent Colleges Dublin (ICD)
Subject Corporate Finance

Question 1

Luca Group. is considering investing in one of two possible projects (A & B) that will involve the development of a new production line.

The initial investment will be €11,500,000.

The company has a cost of capital of 10%. The Cash flows are as follows:

Corporate Finance

  • Calculate for each project:
    1. The Payback period
    2. Net Present Value (NPV)
  • Following the calculation of the above investment techniques identify which project should be undertaken by Luca Group. and outline the reasoning behind your choice
  • Explain one advantage and one disadvantage of the Payback period method and the IRR method of investment appraisal.

Question 2

  • Briefly describe four different stakeholders in a Corporate Organisation, and explain how their objectives may vary
  • Provide an explanation of Debt Factoring as a source of finance for the firm
  • Explain how the Acid test liquidity ratio can be used by managers to control the business

Present Value Table

Present value of 1 i.e. (l + r)– n

where    r     = discount rate

n    = number of periods until payment

Corporate Finance

Corporate Finance

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