The document outlines an assignment focused on financial calculations including Net Present Value (NPV), gross and net returns, Internal Rate of Return (IRR), and Return on Investment (ROI). It presents various scenarios involving cash flows, investment amounts, and fees to be calculated for different projects and investment strategies. Each section requires specific calculations to determine the viability and profitability of the investments discussed.
The document outlines an assignment focused on financial calculations including Net Present Value (NPV), gross and net returns, Internal Rate of Return (IRR), and Return on Investment (ROI). It presents various scenarios involving cash flows, investment amounts, and fees to be calculated for different projects and investment strategies. Each section requires specific calculations to determine the viability and profitability of the investments discussed.
The document outlines an assignment focused on financial calculations including Net Present Value (NPV), gross and net returns, Internal Rate of Return (IRR), and Return on Investment (ROI). It presents various scenarios involving cash flows, investment amounts, and fees to be calculated for different projects and investment strategies. Each section requires specific calculations to determine the viability and profitability of the investments discussed.
The document outlines an assignment focused on financial calculations including Net Present Value (NPV), gross and net returns, Internal Rate of Return (IRR), and Return on Investment (ROI). It presents various scenarios involving cash flows, investment amounts, and fees to be calculated for different projects and investment strategies. Each section requires specific calculations to determine the viability and profitability of the investments discussed.
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Assignment- Self Paced
Section A: Net Present Value (NPV)
1. Single Project NPV: A private equity fund is considering a project
with the following cash flows:
o Initial Investment: $800,000
o Year 1: $200,000
o Year 2: $300,000
o Year 3: $400,000
o Year 4: $500,000
If the discount rate is 12%, calculate the Net Present Value (NPV). Should the project be undertaken?
2. Comparing Investments: Two projects are under consideration with the following cash flows:
Project A:
o Initial Investment: $600,000
o Year 1: $200,000
o Year 2: $200,000
o Year 3: $200,000
o Year 4: $200,000
Project B:
o Initial Investment: $600,000
o Year 1: $100,000
o Year 2: $300,000
o Year 3: $300,000
o Year 4: $100,000
If the discount rate is 10%, calculate the NPV for both projects and recommend which project to choose.
Section B: Gross and Net Returns
3. Gross Return Calculation: A private equity firm invests $3,000,000 in a business. After four years, the investment grows to $5,000,000, and dividends of $200,000 are received during the period.
o Calculate the gross return percentage for this investment.
o If the gross return is annualized over four years, what is the
annualized return?
4. Net Return with Fees:
A venture capital fund generates a gross return of 50% on an investment of $2,000,000. The fund charges:
o Management Fee: 2% annually of the initial investment for 4
years.
o Performance Fee: 20% of profits above a hurdle rate of
10% per year (compounded).
Calculate:
o (a) Total management fees paid.
o (b) Performance fee based on the hurdle rate.
o (c) Net return percentage after fees.
Section C: IRR and ROI
5. Internal Rate of Return (IRR):
An investor invests $1,000,000 in a startup. The startup returns the following cash flows:
o Year 1: $200,000
o Year 2: $300,000
o Year 3: $400,000
o Year 4: $600,000
Calculate the IRR for this investment.
6. Return on Investment (ROI):
A venture capitalist invests $1,500,000 in a company, and after five years, the total exit proceeds amount to $3,750,000.
o Calculate the total ROI percentage.
o If the ROI is annualized, what is the compound annual growth rate (CAGR)?
Section D: Advanced Scenarios
7. Combination of Returns and Fees:
A private equity fund invests $5,000,000 in a company. After six years, the fund earns gross returns of 80%. The fund charges:
o Management Fee: 2.5% annually of the initial investment.
o Performance Fee: 25% of profits above a hurdle rate of
