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57 DCF EXERCISES Calculate the NPV of an investment with the following estimated cash flows,...

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57 DCF EXERCISES Calculate the NPV of an investment with the following estimated cash flows, assuming a cost of capital of 8% Years Annual cash flow 0 1-4 5-8 9 - 10 11 onwards in perpetuity (per year) GH (3,000,000) 500,000 400.000 300,000 100.000 (4 marks) (b) The cash flows for an investment project have been estimated at current prices, as follows: AWNO Year Equipment Revenue Running costs GH GH GHC (900,000) 800,000 (400,000) 800,000 (400.000) 600,000 (350,000) 200,000 400,000 (300,000) It is expected that the cash flows will differ because of inflation. The annual rates of inflation are expected to be: Equipment value: 4% per year Revenue: 3% per year Running costs: 5% per year. The cost of capital is 12% Questions Required (1) Calculate the NPV of the project ignoring inflation (1) Calculate the NPV of the project allowing for inflation (8 marks) Total: 12 marks) AON

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