Net Present Value

| May 22, 2015

The below example is to be in Excel format.

Based on the information provided below, compute the Net Present Value of the project (CO 3).  A Net Present Value Template is Attached.  (Hint: Don’t forget to update the discount rate to the amount required for this project and add your cash flow numbers.)

Royal Dutch Shipping is planning on Investing $1,600,000 to buy a freighter.   Prepare a net present value analysis based on the assumption that the freighter will be sold for 10% of its cost at the end of the year 5.   Assume a 10% cost of capital.  Annual operating cash flows for the project are:

Year 1:   $380,000
Year 2:   $390,000
Year 3:   $400,000
Year 4:   $410,000
Year 5:   $420,000

Prepare a loan amortization schedule based on monthly payments for the $1,600,000 if Royal Dutch Shipping can pay 10% down on a loan for $1,600,000 and can get a loan for 6% interest for 10 years (do not include this in your Net Present Value computations.  This is a separate issue.  (CO 3).  (Hint:  www.bankrate.com/calculators/mortgages/amortization-calculator.aspx )

 

NPV example
Discount rate 16%
Year Cash in (out) PV factors PV of cash flows
0              (80,000) 1.0000                            (80,000)
1                20,000 0.8621                              17,241
2                18,000 0.7432                              13,377
3                22,500 0.6407                              14,415
4                10,000 0.5523                                5,523
5                30,000 0.4761                              14,283
Net Present Value                            (15,161)
Internal rate of return 7.81%

 

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The financial staff of Cairn Communications
comparative financial statements of Blige Inc.

Category: Finance

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