MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
2013/2014 ACADEMIC YEAR
FOURTH YEAR SECOND SEMESTER
COMMON COURSE
COURSE CODE: IRD 400
COURSE TITLE: PROJECT APPRAISAL DEVELOPMENT
DATE:17TH APRIL 2014 TIME: 9.00AM – 12.00PM
INSTRUCTIONS TO CANDIDATES
ANSWER QUESTION ONE AND ANY OTHER THREE QUESTIONS
This paper consists of 2 printed pages. Please turn over
Question 1 (25mks)
a) Distinguish between on a project and a program. 2mks
b) List and explain any four types of projects. 8mks
c) What is project appraisal and what can a project appraisal deliver? 5mks
d) Discus the project life cycle. 5 mks
e) The initial cash outlay of a project is Ksh 100m and it can generate cash inflow of Ksh. 40 m, Ksh. 30m, Ksh 50m and Ksh 20 million in year 1 though 4. Assume a 9% discount rate, should the project be accepted. 5 mks
Question 2 (15mks)
Capital budgeting techniques involves various financial methods used to value and appraise a project. Discuss clearly with the use of the formulas, the two capital budgeting methods. 15mks
Question 3 (15marks)
Explain the social cost benefit analysis as a methodology for evaluating various investments project. Give reasons for difference between social cost benefits versus monetary cost and benefits. 15mks
Question 4 (15mks)
a) A market risk is a systematic risk that involves factors that affect the overall economy. Give and explain various examples of market risks. 10mks
b) Give the various characteristics of an effective project team 5mks
Question 5( 15 marks)
A project wants to replace an old machine which is capable of generating cash flows of sh 200,000, sh 100,000 and sh 50,000 during the next 3 years. It has a a market value of sh 300,000. After 3 yrs this old machine can realize sh 50,000. The project is considering a new machine which will require an initial cash out lay of sh 1,000,000, and is estimated to generate cash flows of sh 800,000 sh 700,000 and sh 450,000 for the next three years. It is expected to have a salvage value after 3 years of sh 250,000. The project cost of capital is 10% .Should the machine be replaced?
(15 marks)
