FNCE $623$ Financial Management

Individual assignment

Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows:

Year Cash flow

$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$

$$ Construct a spreadsheet and calculate the following $($the required rate of return is $12\%)$:

$$

o Payback period

o Discounted payback period

o Internal rate of return $($IRR$)$

o Modified IRR

$$

$$ The discounting approach

$$ The reinvestment approach

$$ The combination approach

o Net present value $($NPV$)$

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