JB Ltd is considering a 3-year project, which will require an initial investment of £70,000 and will earn contribution o
Posted: Wed Mar 09, 2022 8:16 am
JB Ltd is considering a 3-year project, which will require an
initial investment of £70,000 and will earn contribution of
£150,000 per annum. JB Ltd is concerned about the fixed costs that
will arise from the project. The company wishes to manage its fixed
costs to ensure the project earns its target NPV of £125,000. The
fixed costs are expected to be the same each year. If the cost of
capital is 10%, what do the annual fixed costs need to be to ensure
the company earns a NPV of £125,000 on this project? Ignore
taxation.
a. £71,592 b. £18,000 c. £178,050 d. £59,350
initial investment of £70,000 and will earn contribution of
£150,000 per annum. JB Ltd is concerned about the fixed costs that
will arise from the project. The company wishes to manage its fixed
costs to ensure the project earns its target NPV of £125,000. The
fixed costs are expected to be the same each year. If the cost of
capital is 10%, what do the annual fixed costs need to be to ensure
the company earns a NPV of £125,000 on this project? Ignore
taxation.
a. £71,592 b. £18,000 c. £178,050 d. £59,350