Operating Cash Flows

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Operating Cash Flows
Joyce, Student (MBA), United States

What is the NPV of a project that has cost of 52,125 and net cash flows of 12,000 per year for 8 years with a cost of capital of 12 percent?

Operating Cashflows
Mukela Namushi Mubano, Accountant, Zambia
12,000 x 4.968 (discount factor) = 59,616.
NPV = 59,616 - 52,125 = 7,491
The project could be undertaken since the NPV is positive. However, one should not overlook the qualitative effects of deciding to go ahead with the project.

NPV - Question on Calculating Discount Factor
KATHRYN STEINER, MBA, Entrepreneur, United States
How did you calculate the discount factor of 4.968?

Calculating Discount Factor
Mark May, Student (University), United States
The discount factor is arrived from (p/a, i, n) using compound interest table, where under p/a I = 12, n=8.
Or in Excel =pv(i, n,-1) which is = pv(.12,8,-1) = 4.9676.

Caculating Discount Factor
KATHRYN STEINER, MBA, Entrepreneur, United States
Right, finding the present value. Pv = fvn/(1+1)n
Thanks for the clarification.

NPV for Capital Budgeting
Management Fan, Analyst, Philippines
The IRR is 16% which is higher than the discount factor use - 12%. In addition your payback period is around 4.35 year.


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