Operating Cash Flows

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Operating Cash Flows
Joyce, Member
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, Member
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
How did you calculate the discount factor of 4.968?

Calculating Discount Factor
Mark May, Member
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
Right, finding the present value. Pv = fvn/(1+1)n
Thanks for the clarification.

NPV for Capital Budgeting
Management Fan, Member
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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