FIN3701 ASSIGNMENT 01
SEMESTER 02 2023
QUESTION 1
1.1 Use the concept of risk and cash inflows to calculate the NPV and IRR
relating to the investment in project A.
Risk-Adjusted Discount Rate = Risk Free Rate + Risk Premium
= 8%+2% = 10%
Certain cashflows = Adjusted (risk-free) cash flows:
Adjusted CFt= CFt × CEt
YEAR CASHFLOWS CE CERTAIN CASFLOWS
0 500 000 1.00 500 000
1 250 000 0.80 200 000
2 160 000 0.70 112 000
3 120 000 0.60 72 000
4 100 000 0.50 50 000
5 90 000 0.40 36 000
NPV and IRR calculation (Using financial calculator)
CF0 = (R500 000)
CF1 = R200 000
CF2 = R112 000
CF3 = R72 000
CF4 = R50 000
CF5 = R36 000
I/YR = 10%
SEMESTER 02 2023
QUESTION 1
1.1 Use the concept of risk and cash inflows to calculate the NPV and IRR
relating to the investment in project A.
Risk-Adjusted Discount Rate = Risk Free Rate + Risk Premium
= 8%+2% = 10%
Certain cashflows = Adjusted (risk-free) cash flows:
Adjusted CFt= CFt × CEt
YEAR CASHFLOWS CE CERTAIN CASFLOWS
0 500 000 1.00 500 000
1 250 000 0.80 200 000
2 160 000 0.70 112 000
3 120 000 0.60 72 000
4 100 000 0.50 50 000
5 90 000 0.40 36 000
NPV and IRR calculation (Using financial calculator)
CF0 = (R500 000)
CF1 = R200 000
CF2 = R112 000
CF3 = R72 000
CF4 = R50 000
CF5 = R36 000
I/YR = 10%
