Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows: Year Cashflow 0 -$300,000,000 1 $63,000,000 2 $85,000,000 3 -$50,000,000 4 145,000,000 5 $175,000,000 6 -$50,000,000 7 $70,000,000 8 $72,000,000

1. Construct a spreadsheet and calculate the following (the cost of capital is 12%):

Payback period

Discounted payback period

Net present value (NPV)

IRR

2 Based on your analysis, should the company take the project? Why?

3 What if the cost of capital increased to 16%, please recalculate NPV and using both NPV and IRR to show why or why not you should take this project?

4 Plot the NPV against a range of cost of capital (5% to 20%, at 1% each increment) by using Excel ?

5 Please comment on the IRR shortfalls for Belgravia as the CFO?