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 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 Net present value (NPV)

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