1a
Year
(1)
Cash Flow
(million $)
(2)
Tax
(25%)
(1) – (2) = (3)
After Tax Cash Flow
(million $)
(4)
Discount Factor
@ 7%
(3) x (4)
Present Value
(million $)
0
-12.0
-
-
-
-12.000
1
5.5
1.375
4.125
0.93458
3.855
2
6.5
1.625
4.875
0.87344
4.258
3
7.0
1.750
5.250
0.81630
4.286
Scrap Value
2.0
-
2.000
0.81630
1.633
NPV =
2.032
Discount factor (Real rate)
= [(1 + normal rate) / (1 + inflation rate)] – 1
= [(1 + 12.5%) / (1 + 5.1%)] – 1
= (1.125 / 1.051) – 1
= 1.07
= 0.07
= 7%
NPV of the project is .232 million.
2a
TSR = [Dividend + Capital Gain] / Opening share price, expressed a percentage
Capital Gain = (share price at the end of period – share price at the begin of period)
TSR
= {[.5 + (.71 - .58)] / 4.58} x 100
= {(.5 + .13) / 4.58} x 100
= {.63 / .58} x 100
= 0.574 x 100
= 57.4%
Credit:ivythesis.typepad.com
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