8/18/2019 Corporate Finance Sessional Mgt535

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  C O M S A T S I n s t i t u t e o fI n f o r m a t i o n T e c h n o l o g y

 V i r t u a l C a m p u sI s l a m a b a d

Corporate Finance (MGT 535)

Sessional 1

Instructor = Ameena Arshad

1. 

Why must cash flow projections include adjustments for inflation?(4 marks) 

2. 

The opportunity cost of capital is 18 percent for all four investments. (6 marks) 

Initial Cash Cash Flow

Investment Flow, C0 in Year 1, C1 

1 10,000 18,000

2 5,000 9,000

3 5,000 5,700

4 2,000 4,000

a. Which investment is most valuable?

b. Suppose each investment would require use of the same parcel of land. Therefore you can take only

one. Which one?