1.1. What is meant by each of the following statements?
a. “The present value of the future cash flows expected from an investment project is R30,000,000”.
b. “The net present value (NPV) of an investment project is R10,000,000”.
c. “A project’s cost of capital is 10 percent”.
1.2. What are managerial options embedded in investment projects? Give some examples.
2. AS is evaluating a project that is expected to generate the following cash flow stream:
Expected Cash Flow Now-R 100 000End-of-year 1R 50 000End-of-year 2R 50 000End-of-year 3R 50 000
Required:
2.1. If the project’s cost of capital is 12 percent, what is the present value of the project’s expected cash flow stream?
2.2. What is the net present value of the project?
2.3. What is the profitability index of the project?
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