FINC2012 Individual Assignment Semester 2 2024 - DUE 13 September 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)...........
FINC2012 Semester 2 2024 Individual Assignment
Due 13th September 2024...
CORPORATE FINANCE EXAM QUESTIONS AND ANSWERS #20
ESSENTIALS OF CORPORATE FINANCE FULLY EXPLAINED #19
CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #18
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University of South Africa
Corporate Finance II (FINC2012)
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FINC2012
ASSIGNMENT SEMESTER 2 2024
UNIQUE NUMBER:
DUE DATE: 13 SEPTEMBER 2024
, FINC2012
Individual Assignment Semester 2 2024
Unique Number:
Due Date: 13 September 2024
Corporate Finance II
Task 1: NPV and IRR Calculation
1. Initial capital expenditure: $20 million.
2. Depreciation: Straight-line over ten years ($2 million annually).
3. Net Working Capital: $1.25 million invested at inception, recovered in year 10.
4. Production:
o Year 1: 1,000 barrels/day.
o Declines by 15% annually thereafter.
5. Oil price: $80/barrel (constant).
6. Producer payment: 60% of wellhead price ($48/barrel).
7. Operational costs: $8.50/barrel (constant).
8. Tax rate: 35%.
9. Cost of capital: 12%.
Using the above, calculate the annual cash flows over the project’s life by accounting for
production decline, revenue, costs (producer fees + operational costs), depreciation,
and taxes. With these cash flows, calculate the NPV and IRR using financial formulas or
an Excel model.
Recommendation: Based on the NPV (positive/negative) and IRR (greater or
less than 12%), you will determine if the project is financially viable.
Reservations: Discuss uncertainties such as the assumption of constant oil
prices, production decline rates, and any regulatory risks that might affect
profitability.
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