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  • Corporate Finance Sessional Mgt535

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    Muhammad Imran
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    Cash flow projections must include adjustments for inflation so future cash flows are valued accurately in today's dollars. An investment opportunity cost analysis was conducted for 4 projects with the same 18% cost of capital. Investment 1, with the highest initial cash outflow of $10,000 and year 1 cash inflow of $18,000, was determined to be the most valuable. Investment 1 would also be the preferred choice if only one project could be selected due to shared land requirements.

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    Cash flow projections must include adjustments for inflation so future cash flows are valued accurately in today's dollars. An investment opportunity cost analysis was conducted for 4 projects with the same 18% cost of capital. Investment 1, with the highest initial cash outflow of $10,000 and year 1 cash inflow of $18,000, was determined to be the most valuable. Investment 1 would also be the preferred choice if only one project could be selected due to shared land requirements.

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    © All Rights Reserved
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    30 views1 page

    Corporate Finance Sessional Mgt535

    Uploaded by

    Muhammad Imran
    Cash flow projections must include adjustments for inflation so future cash flows are valued accurately in today's dollars. An investment opportunity cost analysis was conducted for 4 projects with the same 18% cost of capital. Investment 1, with the highest initial cash outflow of $10,000 and year 1 cash inflow of $18,000, was determined to be the most valuable. Investment 1 would also be the preferred choice if only one project could be selected due to shared land requirements.

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    © All Rights Reserved
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    of 1

    COMSATS Institute of

    Information Technology
    Virtual Campus
    I

    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

    10,000

    18,000

    5,000

    9,000

    5,000

    5,700

    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?

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