1.1. What is meant by each of the following statements? a. “The present value of the future cash flows expected from an investment project is R30,000,000”. (2) b. “The net present value (NPV) of an investment project is R10,000,000”. (2) c. “A project’s cost of capital is 10 percent”. (2) 1.2. What are managerial options embedded in investment projects? Give some examples. (4)

1.1 a. The statement means that the total value today, in terms of money, of all the anticipated cash flows that will be generated by an investment project in the future is R30,000,000. b. This statement indicates that the net present value (NPV) of the investment project is R10,000,000. NPV is the difference between the present value of cash inflows and the present value of cash outflows, providing an estimate of the project's profitability. c. This statement signifies that the project's cost of capital, which is the rate of return required by the investors to undertake the project, is 10 percent. It represents the opportunity cost of investing in the project as compared to other investments with similar risks. 1.2 Managerial options embedded in investment projects are strategic choices that managers can make to enhance the project's value. Examples include the flexibility to expand or contract production based on market conditions, switching between different production processes, and timing of investment. These options allow managers to adapt to changing circumstances and make decisions that maximize project value.