Sensitize WACC to 2% risk premium for an related business expansion and 4% for unrelated diversification and check the NPV for the same given value of cash flows
finance
Description
EPGDM PAF
ASSIGNMENT –NPV /IRR EVALUATION MODELS
A company
invests in a project costing 100 lakhs at @ WACC of 13% and having a useful
life of 6 years. The pattern of future cash flows is as follows:
|
Year |
1 |
2 |
3 |
4 |
5 |
6 |
|
C inflow |
27 |
32 |
36 |
36 |
31 |
25 |
You are required
to do the following:
1. Calculate NPV.
2. Calculate IRR
3. Sensitize WACC to 2% risk premium for
an related business expansion and 4% for unrelated diversification and check
the NPV for the same given value of cash flows
4. Compare your results in step 3 to IRR
and state your observations
