Project Financing

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The Co-operative University of Kenya

END OF SEMESTRE EXAMINATION DECEMBER-2019


EXAMINATION FOR THE DIPLOMA IN PROJECT MANAGEMENT
(YR I SEM II)
UNIT CODE: DMPM 1103
UNIT TITLE: PROJECT FINANCING

DATE: 3RD DECEMBER, 2019 TIME: 2:00 PM – 4:00 PM

INSTRUCTIONS:
 Answer question ONE (compulsory) and any other TWO questions

QUESTION ONE
(a) What is a project? Distinguish between a project and a programme. (5 marks)
(b) Why does money have time value? (3 marks)
(c) Evaluate the various techniques of appraising projects. (10 marks)
(d) What are the merits and demerits of NPV technique in capital budgeting? (5 marks)
(e) Discuss the importance of project appraisal in project management (7 marks)

QUESTION TWO
(a) Given the following information about a project calculate the NPV, BC RATIO and the
IRR. (15marks)

Year DF at (8%) Total cost Revenue


0 1.000 100 0
1 0.9259 40 80
2 0.8573 40 80
3 0.7938 40 80
(b) What are the merits of IRR techniques in capital budgeting. (5marks)

QUESTION THREE
(a) Write short brief notes on the following: (10marks)
i. Pay-back period
ii. NPV Techniques
iii. IRR Techniques
iv. Sustainability
v. Participation
(b) Why is monitoring and evaluation an important aspect of development projects?
(10marks)

QUESTION FOUR
(a) What are the merits and demerits of NPV techniques in Capital Budgeting (6 marks)
(b) Consider the following after-tax cash flows of two mutually exclusive projects for the
Kenya Youth Funds Trust.

The Co-operative University Of Kenya – December, 2019 1


Project X Capital cost Revenue
Year
0 -50, 000
1 8, 000
2 14, 000
3 20, 000
4 26, 000

Project Y Capital cost Revenue


Year
0 -50, 000
1 20, 000
2 15, 000
3 10, 000
4 10, 000

Discounting factors at 10%

Year Discounting
0 1.000
1 0.909
2 0.826
3 0.751
4 0.683

Required: To compute the NPV of the two projects X and Y and suggest which of the two
projects should be accepted. (14marks)

QUESTION FIVE
You are manager of a five year water project that is coming to an end in one month’s time. You
are required by the funding agency to provide an end of project report upon which important
decision and actions will be made. What information would you include in the report?
(20marks)

The Co-operative University Of Kenya – December, 2019 2

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