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Question 33747: Calculate the NPV(Net Present Value) for a project costing $250,000 which will then provide $25,000 annually for 25 years. The discount rate is 5%. What would the NPV be if the inflows were $20.000 annually for only 20 years?
Answer by venugopalramana(3286)   (Show Source):
You can put this solution on YOUR website! Calculate the NPV(Net Present Value) for a project costing $250,000 which will then provide $25,000 annually for 25 years. The discount rate is 5%. What would the NPV be if the inflows were $20.000 annually for only 20 years?
TABULATE AS FOLLOWS IN XL WORK SHEET WHICH IS SELF EXPLANATORY.IF YOU GO TO FUNCTIONS-FINANCIALS AT THE END AND GIVE THE DISCOUNT RATE OF 0.05 AND NET INFLOW COLUMN AS THE DATA,YOU WILL GET NPV AT THE END.THE FORMULA IN XL IS.
=NPV(0.05,D256:D281)WHERE 0.05 IS THE DISCOUNT RATE GIVEN AS 5% PER YEAR AND D256:D281 IS THE COLUMN WHERE NETINFLOW IS DEPICTED.IF YOU WANT TO KNOW MATHMATICAL FORMULA FOR THIS PLEASE COME BACK AND WE SHALL EXPLAIN
YEAR INFLOW OUTFLOW NETINFLOW YEAR INFLOW OUTFLOW NETINFLOW
1 250000 -250000... 1 250000 -250000
2 25000 25000... 2 20000 20000
3 25000 25000... 3 20000 20000
4 25000 25000... 4 20000 20000
5 25000 25000... 5 20000 20000
6 25000 25000... 6 20000 20000
7 25000 25000... 7 20000 20000
8 25000 25000... 8 20000 20000
9 25000 25000... 9 20000 20000
10 25000 25000... 10 20000 20000
11 25000 25000... 11 20000 20000
12 25000 25000... 12 20000 20000
13 25000 25000... 13 20000 20000
14 25000 25000... 14 20000 20000
15 25000 25000... 15 20000 20000
16 25000 25000... 16 20000 20000
17 25000 25000... 17 20000 20000
18 25000 25000... 18 20000 20000
19 25000 25000... 19 20000 20000
20 25000 25000... 20 20000 20000
21 25000 25000... 21 20000 20000
22 25000 25000
23 25000 25000
24 25000 25000
25 25000 25000
26 25000 25000
NPV $97,474.87 NPV-NEGATIVE ($719.80)
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