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XYZ Company is evaluating project A, which requires OMR 800,000 initial investment. The expected net cash flows are OMR 600,000 and OMR 400,000 at todays
XYZ Company is evaluating project A, which requires OMR 800,000 initial investment. The expected net cash flows are OMR 600,000 and OMR 400,000 at todays prices for year 1 and year 2, respectively. However, these are expected to rise by 5.5% pa because of inflation. The companys cost of capital is 15%.
1. Using the discounting money cash flows (nominal method), what is the net present value of project A (rounded to the nearest OMR)?
a) OMR 6,000
b) OMR 87,289
c) OMR 13,000
d) OMR 88,729
- Using the discounting real cash flows (real method), what is the net present value of project A (rounded to the nearest OMR)?
- a) OMR 13,000
- b) OMR 87,000
- c) OMR 6,000
- d) OMR 88,700
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