Question $1[10$ Marks$]$

Econint recently bought a company and wants to determine the optimal time to sell it$.$ The

partner in charge of this investment has estimated the after$-$tax cash flows from a sale at

different times to be as follows: R$700000$ if sold one year later; R$1000000$ if sold two years

later; R$1200000$ if sold three years later; and R$1300000$ if sold four years later. The

opportunity cost of capital is $12$ percent.

Required:

Advise on the best time for Econint to sell the company and provide supportive justification for

your answer.

Question $2[20$ Marks$]$

Your company is considering two mutually exclusive projects. Project A has an initial capital

investment of R$1$ billion, and Project B has an initial investment of R$1\mathrm{.}5$ billion.

Project A has an expected life of $5$ years with after$-$tax cash inflows of R$400$ million, each year

for the next $5$ years. Project B has an expected life of $10$ years with after$-$tax cash inflows of

R$350$ million, each year for the next $10$ years. The company$$s WACC for project A is $10\%$ and

$12\%$ for project B$.$