Question 1

SooSoo Corporation is a manufacturing company, which has been operated since 2011. The company has always do the risk analysis for their capital budgeting purposes with a cost of capital of 9%. Below are their estimation of cash flows for Project X for three different economic conditions.

Economic condition	CF Year 1	CF Year 2	CF Year 3
Worst case Most likely Best case	450,000 550,000 650,000	400,000 450,000 500,000	700,000 800,000 900,000

As a finance student, you must help Mr Ali Al Habib from risk department to do financial risk analysis for Project X. Your first task to evaluate the cash flow during this pandemic economic condition and calculate the NPV. Next task, you must calculate the NPV in Year 3 as Mr Ali thinks that the forecast of the cash flow is too high. Based from your calculation, rationalize your finding with your analysis.

Question 2

ZenTech Corporation is planning to bid for 3 years project with Kementerian Sains dan Teknologi Malaysia to market a Fintech apps. The success of this project will depend on the acceptance of the customer towards the apps and the demand for the product. To simplify the analysis, the management of ZenTech has decided that demand for the product can either be GOOD or POOR. Miss Suzie from R&D Department has come out with probability which indicates 60% that demand will be good and a 40% chance that it will be poor. The project cost is RM5 million with cash flow estimation of RM3 million per year for 3 years at full manufacturing capacity if demand is good but only RM1.5 million per year if demand is poor. The cost of capital is 10%. Analyse the project and develop a rough probability distribution for NPV.