Qs. 2 Think about a small project, which you would like to implement in your department. It could either be a fresh idea or an expansion of an already existing project. This project should aim at maximizing the returns out of the investment, which you would make. (12 marks) . . Briefly highlight the Project Identify the cash flows for the project in terms of revenues and expenses. Write the rationale for these cash flows. (Both inflows and outflows) Tenure for the project should be between 5-8 years. Determine the cost of capital for the project. Compute IRR, NPV and Payback period of the project over a life of the project. Suggest if the project should be accepted. Give reasons for the same. . . Points to note before attempting the assignments 1. State assumptions used for arriving at the costs and inflows shown in the cash flow statement 2. State and show how WACC has been arrived at (if WACC is obtained from the finance function of the company, explain how it is calculated). 3. Interpret the result obtained 4. In case of the question on project distinguish between new project and upgradation of existing project/product. Determine whether you need to take new set of cash flows or just incremental cash flows. 5. To calculate weights- for publicly listed companies, take market value of the equity capital, and for Pvt or unlisted companies, use book values for equity capital. 6. For Debt, in case of any type of company, use book values