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In: Accounting

Products Inc. is analysing a 5 -year project that produces sales of £100 million per year...

Products Inc. is analysing a 5 -year project that produces sales of £100 million per year (in years 1 through 5). Under the assumption that accounts receivable are 10% of current year sales, the project has a positive NPV of £5 million. However, the management is concerned that customers will pay at a slower rate, which will put accounts receivable for the project at 20% of current year sales. The project’s discount rate is 10%. The NPV of the project under this alternative scenario is closest to

a. £1.55 million b. £4 million

c. £2.7 million

d. Not enough information is provided

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