View the step-by-step solution to:

AS is evaluating a project that is expected to generate the following cash flow stream:

AS is evaluating a project that is expected to generate the following cash flow stream:

 

                                               Expected cash flow

Now -R 100,000

End-of-year 1 R 50,000

End-of-year 2 R 50,000

End-of-year 3 R 50,000

 

2.1. If the project's cost of capital is 12 per cent, 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?

 

 

2.4. Should the project be undertaken? Explain.

Top Answer

Project should be accepted as Net Present Value ,is positive ,Also... View the full answer

npv.png

Year Present Value Calcualtion Cash outflow 0 100000 1 10mm
Cash Inflow 1 50000 0.893 4464235714 [lil.12)"1“50000
2 50000 0.797 3985069388 [1f1.12)"2’50000
3 50000 0.712 35581101239...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online