NPV = Present value of Cash Inflows - Present value of Cash Outflows.
PV OF CASH INFLOW = 480,000*5.650233= 2,712,107
PV OF CASH OUTFLOW=2,700,000
NPV= 2,712,107-2,700,000=12,107
Selection Criteria: If NPV > 0, i.e., if NPV is positive, the project is acceptable
YEAR |
CASH INFLOW |
PV @12% |
PRESENT VALUE OF CASH INFLOW |
||
1 |
480,000 |
1/1.12^1= 0.892857 |
428571 |
||
2 |
480,000 |
1/1.12^2 =0.797194 |
382653 |
||
3 |
480,000 |
0.71178 |
341655 |
||
4 |
480,000 |
0.635518 |
305049 |
||
5 |
480,000 |
|
|
||
6 |
480,000 |
0.506631 |
|
||
7 |
480,000 |
|
217128 |
||
8 |
480,000 |
0.403883 |
|
||
9 |
480,000 |
0.36061 |
|
||
10 |
480,000 |
|
|
||
TOTAL PRESENT VALUE OF CASH INFLOW |
2,712,107 |
||||
0 |
CASH OUTFLOW (INITIAL INVESTMENT) |
(2,700,000) |
|||
NET PRESENT VALUE |
12,107 |
NPV = Present value of Cash Inflows - Present value of Cash Outflows.
PV OF CASH INFLOW = 52,500* 4.62288= 242,701
PV OF CASH OUTFLOW=270,000
NPV= 242,701-270,000= (27299)
Selection Criteria: If NPV < 0, i.e., if NPV is negative, the project is not acceptable
If estimated annual cash inflow is $135,000
PV OF CASH INFLOW = 135,000* 4.62288= 624,089
PV OF CASH OUTFLOW=270,000
NPV= 624,089-270,000= 354,089
Selection Criteria: If NPV > 0, i.e., if NPV is positive, the project is acceptable
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