FACULTY OF COMMERCE DEPARTMENT OF BANKING AND FINANCE BBFH209 / BBFH329: BUSINESS FINANCE 11 ASSIGNMENTS FOR AUGUST 2022 ___________________________________________________________________________ ASSIGNMENT 1 1. Kealeboga limited is considering mutually exclusive investments projects. Project A at a cost of $10000 and project B at a cost of $140000. The planning department of Kealeboga limited had estimated the following probabilities distributions of cash flow to be generated by each project in the next three (3) years. Project A Probability A Cash flow Project B Probability B Cash flow 0.2 $15000 0.2 $10000 0.6 $40000 0.6 $40000 0.2 $35000 0.2 $60000 Kealeboga limited management adjusted for risk by means of a formula R= rf+10cv Where R = required rate of return of the project rf = risk free rate of 6% Cv = coefficient of variation of the projects cash flow Required a) Which of the project is the riskiest if the coefficient of variation is used as a measure of risk (8 marks). b) What are the required rate of return on project A and project B (8 marks). c) Using the net present value (NPV) method, show which project should be accepted (9 marks). 2. Discuss the attractions of operating lease as a source of finance in Zimbabwe (25 marks).