A,
NAV(net present value)= present value of future cash flow - initial investment
= 30188216.69 - 2500000
= 518216.69
PV CF= CF1/ (1+r)n + CF2/ (1+r)n+ .......CFk/ (1+r)k
= 800000/(1.12) + 1200000/(1.12)2+ 1000000/1.123+ 1000000/1.124
= 714285.71 + 956632.65 + 711780.24 + 635518.078
= 30188216.69
B.
NAV(net present value)= present value of future cash flow - initial investment
= 2329600 - 2500000
= -170400
PV CF= CF1/ (1+r)n + CF2/ (1+r)n+ .......CFk/ (1+r)k
= 800000/(1.25) + 1200000/(1.25)2+ 1000000/1.253+ 1000000/1.254
= 2329600
C. lets consider that 50% probability that licence will be granted and 50% probability that licence will not granted
I if we consider 12% interest rate.
NAV = (518216*0.50) + ( -300000*0.50) if licence will not granted then NAV will be - 300000
= 259108 + (-150000)
=109108
ii if we consider 25% int rate
NAV = ( -170400*0.50) + ( -300000*0.50)
= -(85200) + (-150000)
= -235200
D.
if XH will not go a head then they will withdraw plan immediately with loss of 300000 so NAv will be -300000
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