Economics Homework (Cash flow,IRR, discounting ect)
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I usually try to not post whole homework assignments, but I have no time this week. Please show your work for the below problem. Mid-year discounting means you recieve payment in the middle of the year. Help would be very much appreciated
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1. (45 Points) After years of working in the oil patch you have managed to scrape together $1 million you are willing to invest in a drilling venture. Using all your knowledge gained from years of experience you have made the following estimate of operating income and investment amounts and timing.
a. (5 points) What is the maximum amount of money you expect to have to invest in this deal and when will that happen?
b. (5 points) When do you anticipate payout will occur?
c. (5 points) Plot the cumulative net cash flow curve.
d. (5 points) What is the undiscounted return on investment (ROI) for the project?
e. (5 points) What is the undiscounted profit/investment ratio (P:I) where profit = net cash flow?
f. (5 points) What is the net present value at 15%/annum of the net cash flow for the project if all cash flow occurs at the middle of the year?
g. (5 points) Plot the Discounted Cumulative Cash Flow curve for the project assuming all cash flows occur at the end of the year using an interest rate of 5%/annum.
h. (5 points) What is the discounted payout time at 5%? (from part g)
i. (5 points) Calculate the internal rate of return (IRR) for the project assuming mid-year discounting.
|
Year |
Oper Income M$ |
Invest $M |
|
0 |
20 |
|
|
1 |
0 |
80 |
|
2 |
50 |
500 |
|
3 |
140 |
100 |
|
4 |
126 |
|
|
5 |
113 |
|
|
6 |
102 |
|
|
7 |
92 |
|
|
8 |
83 |
|
|
9 |
75 |
|
|
10 |
68 |
