International University of Technology Twintech

Petroleum Economics-S8
Assignment No. 6

Question one:
Given the economic data for an investment proposal:

I= $500 S=$100

A1= $100 A2= $90 A3= $265

t= 0 1 2 5
i*=r=15%
1. Compute NPV for this project.
2. Is this project acceptable?

Question two:
The cash flow profile for an investment proposal is as follows:

I= $1200 A1= $6000 A2=$8000 A3=$10,000 A4=$9000 S=$4000

t= 0 1 2 3 4 5

i*=r=15%
1. Compute NPV.
2. Would you consider this project profitable?
Question three:
The cash flow profiles for two mutually projects are as follows:

Project A
(lump sum at t=0)
I= $15000 S=$0
A=$25000

t= 0 1 3
i*=r= 15%

Project B
(lump sum at t=2)
I= $125000 S=$0
A=$50000

t= 0 2 6
i*=r= 15%
1. Compute NPV for both project.
2. Based on NPV; which project would you choose.

Question four:
The time diagram for an investment proposal is as follows.

A=$60 S=$0

I1= $100 I2= $80 I3=$70 I4=$50

t= 0 1 2 3 9
i*=r=13%
1. Calculate NPV and ROR for this project.
2. Based on NPV and ROR; is this project acceptable?