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# Q1

Year 0 1 2 3 4 5
Casfhlows (50,000) 15,000 15,000 20,000 10,000 5,000

Cost of Capital is 8%

NPV 3,378.83

NPV (133.76)

IRR NPV
10% 994.1
11% -133.76

## Answer: IRR lies between 10% and 11%

Years 0 1 2
Cashflows (150,000) 100,000 120,000

NPV (369.57)

IRR NPV
28% 1376.19
29% -369.57

## IRR lies between 28% and 29%

Proftitability Index

Q7

## PV of furture cash flow of perpetual secrity = cashflow/i

Perpetual security is a security which will give fixed return per year foreever and is benchmarked against a macroeconomic ind

## Initial Investment 20,000

Cashflow 2,000 per year
i 8%

PV 25,000

PI 1.25

Since PI is 1.25, we know that NPV of the project will be positive and therefore, investment can be made in the project

Q8

Year 0 1 2 3 4 5 6 7
Cashflow -375 115 115 115 115 115 115 165

## PV 104.55 95.04 86.40 78.55 71.41 64.91 84.67

PV 585.53

PI 1.56

Since PI is 1.56 and above 1, it means that NPV will be positive and investment can be made in the project.
Regular security PV = Cashflow/(1+i)^n

## gainst a macroeconomic indictaor like GDP, Inflation or IR.

conventional cashflows - NPV and IRR give similar results fro individual projects

## 1. When cashflow pattern differs

2. when scale of projects are different
3. when there are multiple IRRs in a project