FIN3701 Assignment 1 Second Semester 2025

QUESTION 1

1.1

Year Nominal Certainty Adjusted Discount Present
cash flow equivalent cash flow factor @8% values
( R) ( R)
0 (500 000) 1.00 (500 000) 1 (500 000)
1 250 000 0.80 200 000 0.9259 185 180
2 160 000 0.70 112 000 0.8573 95 214
3 120 000 0.60 72 000 0.7938 57 154
4 100 000 0.50 50 000 0.7350 36 750
5 90 000 0.40 36 000 0.6805 24 498
NPV (101 205)



IRR

CF0= -500 000

CF1=200 000

CF2 =112 000

CF3= 72 000

CF4= 50 000

CF5 = 36 000

Comp IRR = 2.78%

, 1.2

NPV

Year Cash flow R Discount factor Present value R
@10%
0 (850 000) 1.0000 (850 000)
1 350 000 0.9090 318 150
2 300 000 0.8264 247 920
3 250 000 0.7513 187 825
4 210 000 0.6830 143 430
5 150 000 0.6209 93 135
NPV 140 460



IRR

CF0= -850 000

CF1=350 000

CF2 =300 000

CF3= 250 000

CF4= 210 000

CF5 = 150 000

Comp IRR = 17.29%

1.3 Decision

-Choose Project B since it adds value with a positive NPV and an IRR above the
required return.