Operating Cash Flows

Net Present Value (NPV)
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Joyce
Student (MBA), United States

Operating Cash Flows

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?

  Mukela Namushi Mubano
Accountant, Zambia
 

Operating Cashflows

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.

  KATHRYN STEINER, MBA
Entrepreneur, United States
 

NPV - Question on Calculating Discount Factor

How did you calculate the discount factor of 4.968?

  Mark May
Student (University), United States
 

Calculating Discount Factor

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.

  KATHRYN STEINER, MBA
Entrepreneur, United States
 

Caculating Discount Factor

Right, finding the present value. Pv = fvn/(1+1)n
Thanks for the clarification.

  Management Fan
Analyst, Philippines
 

NPV for Capital Budgeting

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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