Question

Question

Suppose a company has project X with the following cash flows to evaluate.

1. Calculate NPV and Estimate the IRR of project X using the data given at a cost of capital of 10%.                                                                           10 marks

Project Y                                                           Cash flows                   

                                                         Year                       K’000

                                                                                    

                                                            0                          (30,000)

                                                            1                                 2000

2.        2000
3. 150,000
4. 140,000

2. Examine when you will payback initial cash outflow and also apply how this helps us to implement Appraisal process.                                                 10 marks
3. Discuss the essence of project leadership and how you would use project emotional intelligence to manage projects                                                                   10 marks

Answer 1

Calculation of NPV and IRR

Year	Cash Flow	PV Factor @10%	Present Value
0	(30,000)	1	(30,000)
1	2,000	0.909	1,818.18
2	2,000	0.826	1,652.89
3	150,000	0.751	112,697.22
4	140,000	0.683	95,621.88
		NPV	181,790.17

For IRR Calculation

Year	Cash Flow	PV Factor @15%	Present Value
0	(30,000)	1	(30,000)
1	2,000	0.870	1,739.13
2	2,000	0.756	1,512.29
3	150,000	0.658	98,627.43
4	140,000	0.572	80,045.45
		NPV	151,924.30

IRR = 15% + 0.05 / ( 181,790-151,924 ) * 151924 = 40.43%