1) W XYZ Limited is evaluating Project X , which requires an initial investment of RO40,000...

1) W XYZ Limited is evaluating Project X , which requires an initial investment of RO40,000 . The expected net cash flows are RO15,000 pa for five years at today's prices . However these are expected to rise by 6.0 % pa because of inflation . The firm's cost of capital is 13 % . Find the NPV by : ( a ) discounting money cash flows ( b ) discounting real cash flows .

2) XYZ Limited is evaluating Project X, which requires an initial investment of RO60,000. The expected net cash flows are RO15,000 pa for first two years, RO20,000 for the third and fourth year and RO30,000 for the fifth year. However these are expected to rise by 6.0% pa because of inflation. The firm's cost of capital is 13%. Find the NPV by: (a) discounting money cash flows (b) discounting real cash flows.

Expert Solution

ekkarill92 answered 10 months ago

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