Anton is currently considering an investment in a virtual

reality startup called "VR Ltd".

He plans to loan the startup

$100 million (at t = 0). Anton

expects VR Ltd to make yearly payments to him for three years, as follows:

Payment at the end of year 1 24million

(t = 1)

Payment at the end of year 2 48million

(t = 2)

Payment at the end of year 3 72million

(t = 3)

Anton's cost of capital is 28% p.a. (compounded annually).

Part a

The NPV of this investment is________million.

The internal rate of return for this investment is(higher / lower/equal to)the

cost of capital.

Part b

After further market research, Anton now believes that VR Ltd will have long-term success in the VR market, and plans to restructure the payments as follows. The initial loan of $100 million at t = 0 remains the same. VR Ltd will make payments to him of $15 million per year forever, with the first payment to be made at the end of year one.

Anton's cost of capital is 28% p.a. (compounded annually).Under this updated structure, the NPV of this investment is_____million.

The internal rate of return for this investment is______

Part c

Phuc has informed Anton that the RBA plans to loosen monetary policy in the future.

As a result, Anton's cost of capital will be 28% p.a. for the first five years, and will decrease to 14.0% p.a. thereafter (compounded annually). Other than this, the loan structure from part b

remains unchanged.

Given this new information, the NPV of this investment is______ million. As a result, Anton should (No answer given) VR Ltd.