Project YMC has the following anticipated cash flows before allowing for inflation. The cost of capital...
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Project YMC has the following anticipated cash flows before allowing for inflation. The cost of capital has been calculated at 19.5% to include an allowance for inflation. The rate of inflation is expected to remain constant at 8%. Year Cash flow 0 1 2 3 4 5 40 -1,100,000 370,000 363,000 250,000 255,000 300,000 Required a) Evaluate the project in terms of real cash flows and discount rates. (10 marks) b) Evaluate the project in terms money cash flows and discount rates. (10 marks) c) Critically evaluate usefulness of NPV method. (5 marks) Project YMC has the following anticipated cash flows before allowing for inflation. The cost of capital has been calculated at 19.5% to include an allowance for inflation. The rate of inflation is expected to remain constant at 8%. Year Cash flow 0 1 2 3 4 5 40 -1,100,000 370,000 363,000 250,000 255,000 300,000 Required a) Evaluate the project in terms of real cash flows and discount rates. (10 marks) b) Evaluate the project in terms money cash flows and discount rates. (10 marks) c) Critically evaluate usefulness of NPV method. (5 marks)
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Answer rating: 100% (QA)
a Real cash flows and discount rates To evaluate the project in terms of real cash flows and discount rates we need to adjust the cash flows by removi... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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