Question 6.EX.3: Calculation of the net present value Clement plc is evalua...
Calculation of the net present value
Clement plc is evaluating three investment projects, whose expected cash flows are given in Table 6.4. Calculate the net present value for each project if Carter’s cost of capital is 10 per cent. Which project should be selected?
Table 6.4 Three investment projects with different cash-flow profiles to illustrate the calculation of net present value
\begin{array}{|c|c|c|c|}\hline {\text { Clement plc: cash flows of proposed investment projects }} \\\hline \text { Period } & \begin{array}{c}\text { Project A } \\\text { (£000) }\end{array} & \begin{array}{c}\text { Project B } \\\text { (£000) }\end{array} & \begin{array}{c}\text { Project C } \\\text { (£000) }\end{array} \\\hline 0 & (5,000) & (5,000) & (5,000) \\1 & 1,100 & 800 & 2,000 \\2 & 1,100 & 900 & 2,000 \\3 & 1,100 & 1,200 & 2,000 \\4 & 1,100 & 1,400 & 100 \\5 & 1,100 & 1,600 & 100 \\6 & 1,100 & 1,300 & 100 \\7 & 1,100 & 1,100 & 100 \\\hline\end{array}The "Step-by-Step Explanation" refers to a detailed and sequential breakdown of the solution or reasoning behind the answer. This comprehensive explanation walks through each step of the answer, offering you clarity and understanding.
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