Question: 1. (a) ABX Ltd is considering undertaking a project, which will involve an initial outlay of 300,000. The project has the following cash flows associated

1. (a) ABX Ltd is considering undertaking a

1. (a) ABX Ltd is considering undertaking a project, which will involve an initial outlay of 300,000. The project has the following cash flows associated with it: If a discount rate of 10% is used to calculate the NPV of the project, which of the following statements is correct? (Assume the cash flows arise at the end of each year). [2.5 Marks] (i) The project will yield a positive NPV of 65.5k and have a payback period of 2 years and 3 months. (ii) The project will yield a positive NPV of 65.5k and have a payback period of 2 years and 9 months. (iii) The project will yield a positive NPV of 365.5k and have a payback period of 2 years and 3 months. (iv) The project will yield a positive NPV of 365.5k and have a payback period of 2 years and 9 months. (b) [2.5 Marks] i) What is the probability of completing the project within the budgeted cost of Rs. 850 million? (a) 60 (b) 74 (c) 80 (d) 90 ii) For the degree of confidence to be 86%, what will be the budget? (a) 870 (b) 850 (c) 890 (d) 910

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