PROJECT YEAR TOTAL COST CONSTANT FY08$ Discount Factor Present Value of Annual C
ID: 1214138 • Letter: P
Question
PROJECT YEAR
TOTAL COST
CONSTANT FY08$
Discount Factor
Present Value of Annual Cost
TYPE VALUE
1
$200,00
BOY
1.0000 $200,000
1
$30,000
MOY
0.9866 $29,598
2
$30,000
MOY
0.9604 $28,812
3
$30,000
MOY
0.9348 $28,044
4
$30,000
MOY
0.9099 $27,297
5
$30,000
MOY
0.8857 $26,571
6
$30,000
MOY
0.8622 $25,866
7
$30,000
MOY
0.8392 $25,176
8
$30,000
MOY
0.8169 $24,507
SUBTOTAL
$440,000
NPV= $415,871
8
-$50,000
EOY
0.8060 -$40,300
Total
$390,000
NPV= $375,571
ADJUSTED ECONOMIC LIFE FOR ALTERNATIVE A
PROJECT YEAR
TOTAL COST CONSTANT FY08$1
DISCOUNT FACTOR
TYPE VALUE
PRESENT VALUE OF ANNUAL COST
1
$50,000
MOY 0.9866
$49,330
2
$50,000
MOY 0.9604
$48,020
3
$50,000
MOY 0.9348
$46,740
4
$50,000
MOY 0.9099
$45,495
5
$50,000
MOY 0.8857
$44,285
6
$50,000
MOY 0.8622
$43,110
7
$50,000
MOY 0.8392
$41,960
8
$50,000
MOY 0.8169
$40,845
TOTAL
$400,000
NPV =
$359,785
NPV
An alternative requires $10000 to be paid at the end of year 1, year 2, and year 3. All values are in constant dollars. Using the tables in the chapter, compute the NPV of this alternative. Round intermediate calculations to two decimal places.
$32,741
$34,697
$28,560
$27,284
PROJECT YEAR
TOTAL COST
CONSTANT FY08$
Discount Factor
Present Value of Annual Cost
TYPE VALUE
1
$200,00
BOY
1.0000 $200,000
1
$30,000
MOY
0.9866 $29,598
2
$30,000
MOY
0.9604 $28,812
3
$30,000
MOY
0.9348 $28,044
4
$30,000
MOY
0.9099 $27,297
5
$30,000
MOY
0.8857 $26,571
6
$30,000
MOY
0.8622 $25,866
7
$30,000
MOY
0.8392 $25,176
8
$30,000
MOY
0.8169 $24,507
SUBTOTAL
$440,000
NPV= $415,871
8
-$50,000
EOY
0.8060 -$40,300
Total
$390,000
NPV= $375,571
ADJUSTED ECONOMIC LIFE FOR ALTERNATIVE A
PROJECT YEAR
TOTAL COST CONSTANT FY08$1
DISCOUNT FACTOR
TYPE VALUE
PRESENT VALUE OF ANNUAL COST
1
$50,000
MOY 0.9866
$49,330
2
$50,000
MOY 0.9604
$48,020
3
$50,000
MOY 0.9348
$46,740
4
$50,000
MOY 0.9099
$45,495
5
$50,000
MOY 0.8857
$44,285
6
$50,000
MOY 0.8622
$43,110
7
$50,000
MOY 0.8392
$41,960
8
$50,000
MOY 0.8169
$40,845
TOTAL
$400,000
NPV =
$359,785
Explanation / Answer
For any Year n, SQRT(1+r) received at the end of the year n is equal to 1 received at the middle of the year.
Using this, we can find out the Rate of Return as we can equate the Present Value factors of year 8:
MOY = 0.8169
EOY = 0.8060
Equating, get:
r for EOY = 0.27
Now:
Year Present Value Amount PV 0 1 0 0 1 0.973486132 10000 9734.861 2 0.947675249 10000 9476.752 3 0.922548712 10000 9225.487 28437.1Related Questions
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