FNCE 623 Financial Management

Individual assignment

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

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

Payback period

Discounted payback period

Modified IRR

The discounting approach

The reinvestment approach

The combination approach

Net present value (NPV)

Based on your analysis, should the company take the project? Why? calculate on Excel and show results and answers

IMPORTANT: Use MS Excel functions (PV, FV, NPV, and IRR) in your spreads