discounted cash flow activity 1
TRANSCRIPT
-
8/17/2019 Discounted Cash Flow Activity 1
1/3
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
-
8/17/2019 Discounted Cash Flow Activity 1
2/3
Discounted Cash Flow Activity 1 April 02, 2015
Page 2 of 3
-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
-
8/17/2019 Discounted Cash Flow Activity 1
3/3
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