Question 3:
Juhayna Food Industries is attempting to select the best of three mutually exclusive projects.
The initial investment and after-tax cash inflows associated with these projects are shown in the following table.
Cash flow
Project A
Project B
Project C
Initial Investment
100000
120,000
130,000
Year 1 Cash Inflows
30000
36,500
38000
Year 2 cash inflows
35000
45000
20000
Year 3 cash inflows
40000
42000
Year 4 cash inflows
Year 5 cash inflows
50000
Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%.
TO dO
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