You are a financial analyst working for Salalah Mills LLC The Director of Capital Budgeting has...

You are a financial analyst working for Salalah Mills LLC The Director of Capital Budgeting has asked you to analyze an Investment Proposal. The investment will need an initial cash outflow if OMR 60000 and has a life of 5 years.

Following information is given Cash flow ( OMR) year 1 16000 year 2 16000 year 3 22000 year 4 22000 year 5 31000

a) Calculate the Net present value for using the discounting money cash flows if the rate of inflation is 6 % and cost of capital is 13% .

b) Calculate the Net present value by discounting real cash flows if rate of inflation is 7% and the cost of capital is 12% .

c) What is the impact of inflation on Project Appraisal and how can companies address these issues. (200 words). Also calculate the real interest rate using Fisher effect for South Africa, Brazil, Romania, Vietnam and China, if the nominal interest rate in all the above countries is 10%. Please mention the source of information.

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ekkarill92 answered 1 year ago

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