week 6 lecture notes

# week 6 lecture notes - 1 Complete Problem 14.1 on page 434...

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1. Complete Problem 14.1 on page 434 of the course text (solution is on page 466). Next, work the problem again using the following variables: project yield annual net cash inflows are \$10,500 for the next five years; interest rate of 16.5%, and the initial investment of \$33,000. Calculate the net present value of the cash flows and the IRR for the project using the Excel spreadsheet formula. Explain the concept of Net Present Value. The NPV of a time series of cash flow is concerning both the incoming and outgoing cash management, which is present value. If all future cash is going to be incoming with the only outflow being the actual purchase price, then the Net Present Value is merely the Present Value. NPV is used mostly for budgeting in the finance and accounting industry. 2. Complete Problem 16.4 on page 439 of the course text (solution is on page 475—Table A2- 29). Next work the problem again using the following variables: The selling price is expected to be £350 per tonne for the first three months and £360 per tonne thereafter. Variable costs per tonne

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