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year capital expenditure ($ in millions)
0 221 14
2 10
The project would yield cash flow income of 6 million each year starting from 3rd year of perpetuity. The company applies a discount rate of 10%.
Required: 1) determine the NPV and IRR of the project
2) justify your answerDon’t set me test questions and expect an answer!!!
You must have an answer in the same book in which you found the question, and so you should ask about whatever in the answer is not clear to you and then I will try and help.
I assume that you have watched my free lectures – particularly the Paper F2 lectures since this is really a Paper F2 question.
With regard to “justify your answer” that could not possibly be asked in Paper F9 – there is nothing to ‘justify’. It is simply applying rules!!!
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