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).