Question 2

1. A power plant investment project has the following capital expenditures during a 5-year construction period: Unit: $ Million 1 2 3 4 5 Construction 50 100 120 150 100 Expenditure Year When the construction is completed, the project will have an annual net cash flow of $70 million for 10 years. Suppose the project is fully funded by equity, and the cost of equity is 18%. Please find out the following investment criteria: (each 12%, 60% in total) (1) IRR (2) Modified IRR (3) NPV (4) Traditional payback period (5) Discounted payback period 2. In problem 1, if the project is to breakeven (that is, IRR = cost = of capital or NPV = 0), then what is the amount of net cash flow the project needs to generate each year? (20%)