Chapter 3 – Exercises
Exercise 1 – Basic NPV Calculation
An investment project requires an initial outlay of VND 300 million. The expected cash
flows are:
Year 1: 120 million
Year 2: 150 million
Year 3: 160 million
The discount rate is 10%.
Required: Calculate the NPV and decide whether to accept the project.
Exercise 2 – Present Value of Mixed Cash Flows
A company has a project with the following cash flows:
Year 1: 300 million
Year 2: 400 million
Year 3: 500 million
Year 4: 400 million
Discount rate: 10%.
Required: Calculate the total present value.
Exercise 3 – IRR Calculation
An investment requires VND 300 million. It generates cash flows of 150 million per year
for 3 years.
Required: Estimate the IRR using interpolation.
Exercise 4 – Payback Period
A project requires an initial investment of VND 100 million. Cash flows:
Year 1: 20 million
Year 2: 20 million
Year 3: 30 million
Year 4: 40 million
Required: Calculate the payback period.
Exercise 5 – Book Rate of Return
A project requires an initial investment of VND 400 million and generates annual profit
of 80 million over 5 years.
Required: Calculate the BRR.
Exercise 6 – Mutually Exclusive Projects
Two projects A and B each require 100 million. Discount rate 10%.
Cash flows:
A: 10, 60, 80
B: 70, 50, 20
Required: Calculate NPVs and determine which project should be chosen.
Exercise 7 – Capital Rationing
A firm has VND 20 billion available. Project data:
A: Cost 5, NPV 3
B: Cost 7, NPV 4
C: Cost 10, NPV 8
D: Cost 6, NPV 3
E: Cost 4, NPV 2
Required: Select the combination of projects that maximizes total NPV.