Operating Cash Flows

12manage is looking for contributors...


 
Net Present Value (NPV) > Forum Log in

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
KATHRYN STEINER, MBA, Member
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
KATHRYN STEINER, MBA, Member
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.
 

 
 

  Do you wish to study further? You can learn more from the summary, forum, discussions, lessons, courses, training, instructions, expert tips, best practices and education sources. Register.  


Special Interest Group Leader

You here


More on Net Present Value (NPV)
Summary
Forum
Best Practices

Expert Tips

Resources



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2018 12manage - The Executive Fast Track. V14.1 - Last updated: 16-7-2018. All names of their owners.