Project Analysis and Evaluation (ECO311)
DIPET 1 in Economics - ECNT
Semester: First Semester
Level: 400
Year: 2017
Page 1 sur 2
First Semester Examination: 2016 — 2017
Level 300
PROJECT ANALYSIS AND EVALUATION
Time allowed: 2hrs
NOTE: Attempt all questions, showing all calculations where necessary
QUESTION 1 (30 marks)
Write TRUE for the correct statement and FALSE for the wrong one
i)
An economy with abundant resources has no need for project study.
ii)
The notion of project only applies to physical realizations
iii)
A project is always an entirely new undertaking
iv)
Public investment motive goes beyond excess profit
v)
Project evaluation assists donors in their bid for assistance
vi)
All activities carried out in the different stages form the project cycle
vii)
Replacement cost and depreciation allowance should constitute actual costs of
replacing worn out equipment
viii )
Loan repayment does not necessarily imply the effective utilization of funds
in project evaluation
ix)
The appraisal or evaluation stage is where a project proposal is accepted or rejected
x)
Interest payment is the reward for using someone else's money
QUESTION II (20 marks)
Give precise answers to the following questions
i)
List two reasons why discounting is undertaken
ii )
State the formula for the Present Value (PV) of a sum of money
ii i )
Which discount rate is the most appropriate in evaluating a given project?
(A phrase of not more than 4 words)
iv )
What are the two principal determinants of Net Present Value (NPV)?
v)
State the decision rules for Internal Rate of Return (IRR)
QUESTION III (50 marks)
1)
AKO is to receive a lump sum debt of 100 000 frs which he is entitled in 10 years'
time. How much is he to receive if the sum is compounded at a constant rate of 20%
per annum? (5 marks)
2)
What will be the result if the sum in (1) above compounded semi-annually? (5
marks)
REPUBLIC OF CAMEROON
Peace — Work — Fatherland
THE UNIVERSITY OF BAMENDA
HIGHER TECHNICAL TEACHER TRAINING
COLLEGE
DEPARTMENT OF ECONOMIC SCIENCES
P.O. BOX 39, BAMBILI
Tel : (+237) 33 15 64 19
REPUBLIQUE DU CAMEROUN
Paix — Travail — Patrie
UNIVERSITE DE BAMENDA
ECOLE NORMALE SUPERIEURE DE
L'ENSEIGNEMENT TECHNIQUE
DEPARTEMENT DES SCIENCES
ECONOMIQUES
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3) ASOH is to receive the sum of 10 million frs each year for 9 years from the
estate of his dead father. What is the present worth of this sum if the discount
rate is 15%? (Use a Discounted Cash Flow Table) (5 marks)
4) How much is the 10 million in (3) above worth if it is to be received perpetually?
(5 marks)
5) An investment proposal would initially cost 25 000 Euros and would
generate year-end inflows of 9 000 Euros, 8 000 Euros, 7 000 Euros, 6 000
Euros and 5 000 Euros in one through five years. The required rate of return is
assumed to be 10%. Should the project be undertaken? (5 marks)
6) A firm with a required rate of return of 12% is considering a project that
requires an initial outlay of USD 15 500 and the cash inflows are given as
follows:
Year
USD
1
3000
2
4000
3
6000
4
5000
5
4000
i ) Should t h e p r oject b e u n d e r t aken?
ii) Calculate the IRR and suggest whether the project is acceptable or not.
iii) What is the pa yback period o f this p roject?
iv) What are the main strong points and weaknesses of the payback method of
project appraisal? (25 marks)
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