Homework Answers
| Year | Particulars |
Present Value
Factor {1/((1+0.15)^year)} |
Amount ($) |
Present Value
($) (Amount * Present Value factor) |
| 0 | Initial Investment | 1.00 | (2,000,000) | (2,000,000.00) |
| 1 | Cash inflow | 0.87 | 200,000 | 173,913.04 |
| 2 | Cash inflow | 0.76 | 250,000 | 189,035.92 |
| 3 | Cash inflow | 0.66 | 300,000 | 197,254.87 |
| 4 | Cash inflow | 0.57 | 350,000 | 200,113.64 |
| 5 | Cash inflow | 0.50 | 400,000 | 198,870.69 |
| 6 | Cash inflow | 0.43 | 450,000 | 194,547.42 |
| 6 | Sale Value | 0.43 | 4,000,000 | 1,729,310.38 |
| 6 | Loan payment | 0.43 | (2,500,000) | (1,080,818.99) |
| 6 | Return of Initial Investment | 0.43 | 2,000,000 | 864,655.19 |
| NPV | 666,882.16 |
Since the NPV is positive hence the project should be accepted.
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