FINC300 ASSIGNMENT 5

# FINC300 ASSIGNMENT 5 - Net Present Value NPV =(R1 R2 R3 1...

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Net Present Value NPV =(R1+R2+R3)/( 1 + i )^1( 1 + i )^2( 1 + i )^3) − Initial Investment. Intrest rate = 10% ('000) = (260/(1.1) + 273/(1.1)2 + 286.6/(1.1)3 + 300.6/(1.1)4 + 356.5/(1.1)5 + 373.5/ (1.1)6) -600 = 714.8136 Internal Rate of Return IRR = X + {[x(x+y)] *(Y-X)} X = Discount rate for positive NPV Y= Discount rate for negative NPV x= positive NPV found using X y= negative NPV found using Y X = 10% ('000) = (260/(1.1) + 273/(1.1)2 + 286.6/(1.1)3 + 300.6/(1.1)4 + 356.5/ (1.1)5 + 373.5/(1.1)6) -600 x = 714.8136 Y = 50% ('000) = (260/(1.5) + 273/(1.5)2 + 286.6/(1.5)3 + 300.6/(1.5)4 + 356.5/ (1.5)5 + 373.5/(1.5)6) -600

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Unformatted text preview: y = -81.30041 IRR = 0.1 + {[714.8136/(714.8136+81.30041)] *(0.5-0.1)} = 45.92% Cash Payback [Period] = 600000 - (260000+ 273000) = 67000 Therefore, payback period =2 years + (67000/ 286600) = 2.23 years. Discounted Payback Period: =600000 – (236364+225620) = 138016 thus, = 2years + (138016/215327) = 2.64 years. Accounting Rate of Return ARR = Average annual income * 100/Average investment Average annual income ('000) = 200 + 213+ 226.6 + 240.6 + 296.5 + 313.5/6 = 248.367 Average investment ('000) = 600 ARR = (248.367/ 600) * 100 = 41.3945%...
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