discounted cash flow activity 1

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  • 8/17/2019 Discounted Cash Flow Activity 1

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     Discounted Cash Flow Activity 1 April 02, 2015

    Page 1 of 3

    DISCOUNTED CASH FLOW ACTIVITY 1

    From the question given, the following – Table 1 was generated;

    Year

    Capital

    Expenditure

    Operating

    Expenditure

    Annual

    Expenditure

    CumulativeValue of

    Investment

    AnnualIncome from

    Investment

    Cumulative

    ROI

    DiscountRate

    (3.3%)

    Discount

    Factor

    Net Annual

    Cash Flow Annual NPV

    Cumulative

    NPV

    1 £100,000 £0 £100,000 £100,000 £0 £0 0.033 0.968 -100,000.00 -96,805.42 -96,805.42

    2 £900,000 £0 £900,000 £1,000,000 £0 £0 0.033 0.937 -900,000.00 -843,416.06 -940,221.48

    3 £25,000,000 £4,000,000 £29,000,000 £30,000,000 £1,300,000 £1,300,000 0.033 0.907-

    27,700,000.00 -25,129,208.20 -26,069,429.68

    4 £36,000,000 £11,000,000 £47,000,000 £77,000,000 £2,500,000 £3,800,000 0.033 0.878-

    44,500,000.00 -39,080,375.23 -65,149,804.90

    5 £50,000,000 £28,000,000 £78,000,000 £155,000,000 £76,000,000 £79,800,000 0.033 0.850 -2,000,000.00 -1,700,311.09 -66,850,116.00

    6 £9,000,000 £18,000,000 £27,000,000 £182,000,000 £62,000,000 £141,800,000 0.033 0.823 35,000,000.00 28,804,882.98 -38,045,233.02

    7 £5,000,000 £23,000,000 £28,000,000 £210,000,000 £71,000,000 £212,800,000 0.033 0.797 43,000,000.00 34,258,331.30 -3,786,901.72

    8 £500,000 £17,000,000 £17,500,000 £227,500,000 £58,000,000 £270,800,000 0.033 0.771 40,500,000.00 31,235,786.88 27,448,885.17

    9 £0 £17,000,000 £17,000,000 £244,500,000 £32,000,000 £302,800,000 0.033 0.747 15,000,000.00 11,199,235.20 38,648,120.36

    10 £7,000,000 £2,000,000 £9,000,000 £253,500,000 £24,000,000 £326,800,000 0.033 0.723 15,000,000.00 10,841,466.79 49,489,587.15

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     Discounted Cash Flow Activity 1 April 02, 2015

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    -50,000,000.00

    -40,000,000.00

    -30,000,000.00

    -20,000,000.00

    -10,000,000.00

    0.00

    10,000,000.00

    20,000,000.00

    30,000,000.00

    40,000,000.00

    0 1 2 3 4 5 6 7 8 9 10 11

    Annual NPV

    Payback Period -Beginning of sixth year

     

    1.

    The payback period is the beginning of the 6th year.

    2.

    Solution in Table 1

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     Discounted Cash Flow Activity 1 April 02, 2015

    Page 3 of 3

    3.

    4.

    NPV becomes positive in the 8th year

    5.

    From the table 1;

    Cumulative NPV = 49,489,587.15

    -80,000,000.00

    -60,000,000.00

    -40,000,000.00

    -20,000,000.00

    0.00

    20,000,000.00

    40,000,000.00

    60,000,000.00

    0 2 4 6 8 10 12

    Annual and Cumulative NPV

    Annual NPV Cumulative NPV

    NPV turns

    positive