DSC1630 Assignment 4 Semester 1
& 2 2021
DSC1630
, 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
& 2 2021
DSC1630
, 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
