Section A) Compulsory Question 1

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Section A) Compulsory Question 1. A&G Ltd. is a housing company, intending to undertake a new project, required $255,460 of initial investment. The cost of capital for this project is estimated at 11% per annum. A consultant of A&G Ltd. has come up with the following cash flow projections: Cash flows/Years 2021 2022 2023 2024 2025 2026 Cash inflows ({) 68,540 82,920 120,360 180,560 210,450 260,460 Cash outflows () 72,650 98,470 90,250 95,780 100,350 105,780 As the Finance Director of A&G Ltd., you are required to: a) Appraise the proposed project using the Net Present Value (NPV) technique [30 Marks] b) Make recommendations to the management of A&G Ltd. [5 Marks] c) Discuss the advantages and disadvantages of the NPV technique. [5 Marks] Total [40 Marks]