1) W XYZ Limited is evaluating Project X , whichrequires an initial investment of RO40,000 . The expected net cashflows are RO15,000 pa for five years at today's prices . Howeverthese are expected to rise by 6.0 % pa because of inflation . Thefirm'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 requiresan initial investment of RO60,000. The expected net cash flows areRO15,000 pa for first two years, RO20,000 for the third and fourthyear and RO30,000 for the fifth year. However these are expected torise by 6.0% pa because of inflation. The firm's cost of capital is13%. Find the NPV by: (a) discounting money cash flows (b)discounting real cash flows.
