DSC1630 Assignment 4 Semester 1 & 2 2021

DSC1630 Assignment 4 Semester 1
& 2 2021




DSC1630
ASSIGNMENT 4 SEMESTER 1 & 2 2021

UNIQUE NUMBER: 293441


SOLUTIONS, EXPLANATIONS, WORKINGS, AND REFERENCES

, 1. 1 We are asked to determine the IRR for five successive annual cash inflows. Thus using the formula
for the IRR we can write




Using your calculator we determine that the IRR is 7,78%.




2. 1 Given the NPV, PI and IRR we need to determine if we want to invest in Investment X or Y. Now




We accept Investment X as the NPV is positive, the PI is greater than 1 and the IRR is greater than
the cost of capital.



3. 2 This is an average rate of return problem as the average rate of return is given. The income or
cash inflows are given. First, we calculate the average of all the inflows. That means add them all
together and divide by the number of inflows. Secondly, you express the average calculated in the
first step as a ratio to the outflow, and solve the investment level:




4. 2 The profitability index is