FIN3701_Assignment 1_S2_2025_Solutions

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FIN3701_ASSIGNMENT 1_S2_2025_SOLUTIONS

, QUESTION 1

1.1

Year Nominal Certainty Adjusted Discount Present
cash flow equivalent cash flow factor @8% values
( R) ( R)
0 (500 000) 1.00 (500 000) 1 (500 000)
1 250 000 0.80 200 000 0.9259 185 180
2 160 000 0.70 112 000 0.8573 95 214
3 120 000 0.60 72 000 0.7938 57 154
4 100 000 0.50 50 000 0.7350 36 750
5 90 000 0.40 36 000 0.6805 24 498
NPV (101 205)



IRR

CF0= -500 000

CF1=200 000

CF2 =112 000

CF3= 72 000

CF4= 50 000

CF5 = 36 000

Comp IRR = 2.78%