Scribd
Upload
89 views

4 Assignment 7 PDF

This document contains an assignment on advanced financial management for a postgraduate MBA program. It includes three parts: 1) true/false questions about investment and discounted cash flow concepts, 2) discussion questions about project appraisal methods and risk, and 3) worked problems calculating payback period, accounting rate of return, net present value, and internal rate of return for sample investment projects. Students are asked to complete the assignment by answering the questions and showing their work.

Uploaded by

asmelash gidey
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
89 views

4 Assignment 7 PDF

This document contains an assignment on advanced financial management for a postgraduate MBA program. It includes three parts: 1) true/false questions about investment and discounted cash flow concepts, 2) discussion questions about project appraisal methods and risk, and 3) worked problems calculating payback period, accounting rate of return, net present value, and internal rate of return for sample investment projects. Students are asked to complete the assignment by answering the questions and showing their work.

Uploaded by

asmelash gidey
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Micro Link Information Technology & Business College

Postgraduate Program
Masters of Business Administration (MBA)
Advanced Financial Management
Chapter-7

Dear readers/ students, in order to check your understanding of the course Financial Management
(FM), you are expected to answer the following questions correctly and submit your answer
accordingly through Online in softcopy. Perform each questions according to their instructions.

Type of Assessment: Assignment-7

Part-I- True or False Item Questions


Instruction:
Read the Questions Carefully and if the Statement is Correct Write “True” Otherwise False.

1. An investment can be simply defined as expenditure in cash or its equivalent during one or
more time periods in anticipation of enjoying a net inflow of cash.
2. Net Present Value (NPV) means the total period with which the total amount invested will
be recovered throughout net cash flow after tax.
3. The distinguishing characteristics of the discounted cash flows (DCF) capital budgeting
techniques is that they take into consideration the “time value of money” while evaluating
the costs and benefits of the project.
4. Payback period may be described as the summation of the present values of cash proceeds
(Cash Flows after tax) in each year minus the original investment.

1
Part-II- Discussion Questions

Instruction:
Write the correct answer in a short and precise ways for the following questions

1. What is project appraisal?


2. Explain the needs and importance of project appraisal.
3. Explain the various methods of project appraisal techniques.
4. What is risk and uncertainty?

Part-III- Work-out Item Questions

Instruction:
Read the Questions Carefully and perform each of them using the appropriate methods.

1. Calculate the payback period from the following information:


a. Cash outlay Birr 50,000 and
b. Cash inflow Br 12,500.
2. Suppose a sum of $500,000 has to be invested in a project who’s expected net cash flows are
as follows:
Year Annual Net Cash Flows Annual Cumulative
0 ($500,000) ($500,000)
1 185,000 (315,000)
2 125,000 (190,000)
3 140,000 (50,000)
4 170,000 120,000
5 180,000 300,000

Then, calculate the pay-back period for the above cash flows.

2
3. Determine Accounting Rate of Return (ARR) from the following data of Project –A.
Particulars Project –A
Cost ------------------------------------------ $56,000
Annual Net Income:
Year 1 $3,000
2 $5,000
3 $7,000
4 $9,000
5 $11,000
Total Income -------------- $35,000
Estimated Life: 5 Years
Estimated Salvage Value: Zero______________

4. Consider the project on the bases of the NPV and IRR techniques.
Project:
Total cost of the project is $3, 500,000. The business firm has a minimum required rate of
return (cost of capital, K) of 12 per cent. Salvage value is zero.
Annual
Year Net Cash Inflows
1 1,000,000
2 1,000,000
3 1,000,000
4 1,000,000
5 500,000
6 500,000
Calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) for the project.

You might also like