FIN3701
EXAM JUNE 2023
QUESTION 1
NPV and IRR relating to the investment in project A.
Cash Certainty Certain PVIF Present value of
Year
inflows Equivalents Cashflows @10% cashflows
1 250 000 0,90 225000 0,909 204 525,00
2 160 000 0,80 128000 0,826 105 728,00
3 120 000 0,60 72000 0,751 54 072,00
4 100 000 0,50 50000 0,683 34 150,00
5 100 000 0,40 40000 0,621 24 840,00
Total 423 315,00
Discount rate = Risk free rate +risk premium
= 8 + 2 = 10%
Net Present Value: Present Value of Cash Inflows – Initial cost of Investment
= R423 315 – R450 000
= - R26 685.00
IRR (using the financial calculator) = 6.71%
EXAM JUNE 2023
QUESTION 1
NPV and IRR relating to the investment in project A.
Cash Certainty Certain PVIF Present value of
Year
inflows Equivalents Cashflows @10% cashflows
1 250 000 0,90 225000 0,909 204 525,00
2 160 000 0,80 128000 0,826 105 728,00
3 120 000 0,60 72000 0,751 54 072,00
4 100 000 0,50 50000 0,683 34 150,00
5 100 000 0,40 40000 0,621 24 840,00
Total 423 315,00
Discount rate = Risk free rate +risk premium
= 8 + 2 = 10%
Net Present Value: Present Value of Cash Inflows – Initial cost of Investment
= R423 315 – R450 000
= - R26 685.00
IRR (using the financial calculator) = 6.71%
