Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A B C D E F G 1 Discount rate 10% 3 PROJECT 1 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL

image text in transcribedimage text in transcribedimage text in transcribed
A B C D E F G 1 Discount rate 10% 3 PROJECT 1 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL 4 Benefits $2,000 $3,000 $4,000 $5,000 $14,000 5 Costs $5,000 $1,000 $1,000 $1,000 $1,000 $9,000 6 Cash flow ($5,000) $1,000 $2,000 $3,000 $4,000 $5,000 7 NPV $2,316 8 Formula =npv(b1,b6:f6) Note that totals are 9 equal, but NPVs are 10 PROJECT 2 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL not because of the time value of money 11 Benefits $1,000 $2,000 $4,000 $4,000 $4,000 $15,000 12 Costs $2,000 $2,000 $2,000 $2,000 $2,000 $10,000 13 Cash flow ($1,000) $0 $2,000 $2,000 $2,000 $5,000 14 NPV $3,201 15 Formula =npv(b1,b13:f13) 16 17 @ Cengage Learning 2016 FIGURE 4-4 Net present value exampleChapter 4 Discount rate 8% Assume the project is completed in Year 0 Year 0 1 2 3 Total Costs 140,000 40,000 40,000 40,000 150 Discount factor 0.93 0.86 0.79 Discounted costs 140,000 37,200 34,400 31,600 243,200 Benefits 0 200,000 200,000 200,000 Discount factor 0.93 0.86 0.79 Discounted benefits 0 186,000 172,000 158,000 516,000 Discounted benefits - costs (140,000) 148,800 137,600 126,400 272,800 NPV Cumulative benefits - costs (140,000) 8,800 146,400 272,800 ROI 112% Payback In Year 1 @ Cengage Learning 2016 FIGURE 4-5 JWD Consulting net present value and return on investment example

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Contract And Commercial Management

Authors: Van Haren

1st Edition

9087537123, 978-9087537128

More Books

Students also viewed these General Management questions

Question

Do they deal with conflict among themselves?

Answered: 1 week ago

Question

=+b) Cut the runs to 8 by testing only in hot water.

Answered: 1 week ago