Question 2

AS is evaluating a project that is expected to generate the following cash flow stream:

Expected Cash FlowNow-R 100 000End-of-year 1R 50 000End-of-year 2R 50 000End-of-year 3R 50 000

Required:

2.1. If the projects cost of capital is 12 percent, what is the present value of the projects expected cash flow stream?

2.2. What is the net present value of the project?

2.3. What is the profitability index of the project?

2.4. Should the project be undertaken? Explain.