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Category > Business & Finance Posted 03 Aug 2017 My Price 11.00

ABC Company is evaluating 3 investment situations.

ABC Company is evaluating 3 investment situations. If only the project in question is undertaken, the expected present values and the amounts of investment required are as follows:

 

ProjectInvestmentPV of Future

RequiredCash Flows

1200000290000

2115000185000

3270000400000

 

If projects 1 and 2 are jointly undertaken, there will be no economies; the investment required and PV’s will simply be the sum of the parts. With projects 1 and 3, economies are possible in investment because one of the machines acquired can be used in both production processes. The total investment required for projects 1 and 3 combined is Rs440000. If projects 2 and 3 are undertaken, there are economies to be achieved in marketing and producing the products but not in investment. The expected PV of future cash flows for projects 2 & 3 combined is Rs. 6,20,000. If all three projects are undertaken simultaneously, the economies noted above will still hold. However, a Rs 1,25,000 extension on the plant will be necessary, as space is not available for all three projects. Which project or projects should be chosen?

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Status NEW Posted 03 Aug 2017 08:08 AM My Price 11.00

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