5 pts D Question 6 Amber Company is considering a one-year project that requires

Q: 5 pts D Question 6 Amber Company is considering a one-year project that requires

Calculation of Rate of Return: Particulars Amount $ Initial Investment 500000 Flotation cost @2% 10000 Total cost A. 510000 Year End Cash Flow B. 562000 Net Return (B-A) C. 52000 % Rate of Return (C/A)*100 10.20% Particulars Amount $ Initial Investment 500000 Flotation cost @2% 10000 Total cost A. 510000 Year End Cash Flow B. 562000 Net Return (B-A) C. 52000 % Rate of Return (C/A)*100 10.20%

ID: 2796044 • Letter: 5

Question

5 pts D Question 6 Amber Company is considering a one-year project that requires an initial investment of $500,000. However, to raise this capital, the company will incur flotation costs that are 2% of the initial investment amount. At the end of the year, the project is expected to produce a cash inflow of $562,000. What is the rate of return that the company expects to earn on this project after taking flotation costs into consideration? Your answer should be between 7.32 and 16.60, rounded to 2 decimal places, with no special characters.

Explanation / Answer

Calculation of Rate of Return:

Particulars

Amount $

Initial Investment

500000

Flotation cost @2%

10000

Total cost A.

510000

Year End Cash Flow B.

562000

Net Return (B-A) C.

52000

% Rate of Return (C/A)*100

10.20%