All about Net Present Value (NPV)
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Operating Cash Flows
Joyce, Student (MBA), United States, 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?
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Operating Cashflows
Mukela Namushi Mubano, Accountant, Zambia, 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.
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Calculating Discount Factor
Mark May, Student (University), United States, 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.
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Caculating Discount Factor
KATHRYN STEINER, MBA, Entrepreneur, United States, Member
Right, finding the present value. Pv = fvn/(1+1)n
Thanks for the clarification.
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NPV for Capital Budgeting
Management Fan, Analyst, Philippines, 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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