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2. A certain project has a duration of 7 years with the Outbound cash flow reported in Table 1. Two alternative terms of payment are
2. A certain project has a duration of 7 years with the Outbound cash flow reported in Table 1. Two alternative terms of payment are reported in Table 2 and 3. The currency is Millions of Dollars. The discount rate (or WACC) is 10% TABLE 1 Year Outbound cash flow 0 10 1 20 2 20 3 50 4 70 5 50 6 20 7 10 TABLE 2-CASE A Year Inbound cash flow 0 20 4 30 5 30 6 30 7 30 1 2 3 30 40 50 TABLE 3 - CASE B Year Inbound cash flow 0 10 1 10 2 10 3 10 4 10 5 30 6 200 7 200 Tasks (a) Show the graph of the project balance for each year for both cases [10 marks] (b) Calculate the maximum exposition for both cases [5 marks] (c) Calculate the Total exposition for both cases [5 marks] (d) Calculate the Net Present Value for both cases [5 marks] (e) Compare and contrast the findings for Case A and Case B focusing the discussion on the trade of project risk against project return [8 marks]
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