Project Analysis and Evaluation (ECO311)
DIPET 1 in Economics - ECNT
Semester: First Semester
Level: 400
Year: 2013
UNIVERSITY OF BAMENDA
HIGHER TECHNICAL TEACHER TRAINING COLLEGE (HTTTC)
DEPARTMENT OF ECONOMICS (LEVEL 300)
FIRST SEMESTER EXAM: 2013/2014
PROJECT ANALYSIS AND EVALUATION
Time Allowed: 2hrs
Note: Attempt all questions. The best score in any of the 20 mark questions will be considered
as CA. Show all calculations where necessary
.
QUESTION I (20 Marks)
A i) A business man must consider two things to determine whether
or not a project is worthwhile. What are these two things (two
words)
ii) The concept of project has different connotations to different
people because of __________(two words)
iii) List the two major motives of investments (two or three words)
iv) What is the first stage in project analysis? (one word)
v) What name do you give to preliminary expenditures of projects?
(Two words)
. B. State whether the following statements are FALSE or TRUE.
i) All project costs and benefits must be quantified in
order for the project to be accepted.
(
ii) The Net Present Value (NPV) of a project is the net worth
of the compound sum of the project's income.
iii) The Internal Rate of Return (IRR) and the NPV must be equal in
perfect competition.
ix) The NPV diminishes with time.
x) The most important role of project analysis is to minimize
opportunity cost.
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QUESTION II (20 marks)
Assume an annual interest rate of 8%, what will be the value of 20 million
frs
i)
Received in two years compounded semi-annually?
ii)
Received one year from now?
iii)
Received at the end of the first year compound quarterly
iv)
Received at the beginning of the 5
t h
year
v)
Received at the end of four years
Question III (30 marks)
i) Using rules 72 and 69, how long does it take to double a given sum at 4% and
8%?
ii) ABL Ltd had revenue of 100 million frs in 1990 which increased to
1000 million frs in 2000, what is the compound growth rate in
revenues?
iii) a) Find the Present Values of the following income stream at 12%
(use three decimal places)
Year
1
F
2
3
4
_
5
6
7
_
8
Cash Flow
1000
1
2000
2000
3000
3000
4000
4000
5000
b)
if the businessman had invested the sum of 13,376 frs in year
zero, what is his NPV?
c) What is the IRR of the project?
d) Under what market conditions is this firm operating? ,
QUESTION IV (30 marks)
Mr. OBI has 15,000 frs to invest in four projects (A; B; C; and D)
with the following net cash flows.
Year
A
B
C
.
❑
0
-15000
-
15000
-15000
-15000
1
3000
10500
,
4500
4500
2
12000
1500
6000
7500
3
1500
1500
4500
6000
4
-
3000 ..
3000
6000
5
-
13
.
500
13500
7500
i)
If the investor had set for himself 3 years to recoup his
investment, which projects} will he choose?
ii)
Rank the projects on the basis of pay-back
iii)
If the cost of capital is 12%, rank the projects on the basis of
the NPV.
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