Calculate NPV for each project. Please workout problem.. Discount rate 10% Year
ID: 2614584 • Letter: C
Question
Calculate NPV for each project. Please workout problem..
Discount rate
10%
Year
Project A
Project B
Project C
2018
($3,000,000)
($3,000,000)
($3,200,000)
2019
$0
$975,000
$985,000.00
2020
$600,000
$975,000
$925,000.00
2021
$900,000
$975,000
$1,000,000.00
2022
$3,000,000
$1,000,000
$950,000.00
Discount rate
10%
Year
Project A
Project B
Project C
2018
($3,000,000)
($3,000,000)
($3,200,000)
2019
$0
$975,000
$985,000.00
2020
$600,000
$975,000
$925,000.00
2021
$900,000
$975,000
$1,000,000.00
2022
$3,000,000
$1,000,000
$950,000.00
Explanation / Answer
Project - A
Year
Cash Flow
Present Value Factor
Present Value of cash flow
1
0
0.90909
0
2
600,000.00
0.826446
495,867.77
3
900,000.00
0.751314
676,183.32
4
3,000,000.00
0.683013
2,049,040.37
Total Present Value of cash flows
3,221,091.46
Net Present Value = Present Value of cash flows – Initial Investment
= $3,221,091.46 – 30,00,000
= $221,091.46
Project - B
Year
Cash Flow
Present Value Factor
Present Value of cash flow
1
975,000.00
0.90909
886,363.64
2
975,000.00
0.826446
805,785.12
3
975,000.00
0.751314
732,531.93
4
1,000,000.00
0.683013
683,013.46
Total Present Value of cash flows
3,107,694.15
Net Present Value = Present Value of cash flows – Initial Investment
= $3,107,694.15 – 30,00,000
= $107,694.15
Project - C
Year
Cash Flow
Present Value Factor
Present Value of cash flow
1
985,000.00
0.90909
895,454.55
2
925,000.00
0.826446
764,462.81
3
1,000,000.00
0.751314
751,314.8
4
950,000.00
0.683013
648,862.78
Total Present Value of cash flows
3,060,094.94
Net Present Value = Present Value of cash flows – Initial Investment
= $3,060,094.94 – 32,00,000
= -$139,905.06 [Negative NPV]
Year
Cash Flow
Present Value Factor
Present Value of cash flow
1
0
0.90909
0
2
600,000.00
0.826446
495,867.77
3
900,000.00
0.751314
676,183.32
4
3,000,000.00
0.683013
2,049,040.37
Total Present Value of cash flows
3,221,091.46
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