The management of Oman Investment Company is currently reviewing the company's investment alternatives for the coming year especially that the overall economic condition is constrained due to lockdown of COVID-19 pandemic and reduction in oil prices for many years. Based on economic reports, the likelihood that the recession period will continue is 30%, while the growing period is likely to occur with a probability of 40% given that the remaining expected period will be stable. The company has to choose between four mutually exclusive projects, the outcomes of which depend on the state of the economy. The following estimates have been made:

State of Economy	Recession	Stable	Growing
Project	NPV (OMR)	NPV (OMR)	NPV (OMR)
Project (A)	120,000	150,000	200,000
Project (B)	80,000	12,000	160000
Project (C)	100,000	140,000	190000
Project (D)	180,000	12,000	190,000

The Company also is evaluating project (F) in which it has the following cashflow: Initial Investment of OMR 70,000; variable cost of OMR 5,000 for three years; and cash inflow of OMR 10,000 p.a. These cash inflows arise from selling 1,000 units at OMR10 per unit. The expected risk adjusted rate is 8% while discount rate is 10%.

Assume that sensitivity of Project (F) to discount rate is 123%, then the discount rate for this project will be:

Select one:

a.

9.84%

b.

22.30%

c.

12.30%

d.

17.84%

If the sensitivity of Project (F) to cash inflow is -2.315, this rate implies that to get a zero NPV the total present value of cash inflow should be:

Select one:

a.

OMR 32,967.22

b.

OMR 57,114.50

c.

OMR 70,000.00

d.

OMR 31,343.55

Assume that the sensitivity of project (F) to cost of capital is 123%, this statement implies that:

Select one:

a.

123% as a discount rate would result in zero NPV

b.

123% increase in cost of capital would result in a zero NPV

c.

-123% as a discount rate would result in negative NPV

d.

123% decrease in cost of capital would result in a zero NPV