{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 5 lecture

# Xls file worksheet page 94 95 22 another npv example

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: .05 (1.05) 2 (1.05) 3 = −\$1,000 + \$285.71 + \$317.46 + \$388.73 = −\$8.10 NPV = −\$1,000 + rate CF PV(CF) 5% 0 1 2 3 \$ (1,000.00) \$ 300.00 \$ 350.00 \$ 450.00 \$ (1,000.00) \$ 285.71 \$ 317.46 \$ 388.73 NPV \$ (8.10) Reference (Example): File: Pfe_chap05.xls File: Worksheet: “page 94-95” 22 Another NPV example • Using both “the long way” and the NPV Using function in Excel, calculate the NPV of the following project, using an 8% discount rate following 23 Discount rate & NPV – Investment profile shows how sensitive the Investment NPV is to the discount rate determination NPV • shows the maximum rate leading to NPV > 0 • gives a “cross-over rate” when comparing two gives projects @8%: CF projects PV(CF) CFB PV(CF) A 0 -100000 1 30000 2 30000 3 30000 4 30000 5 30000 PV(inflows) NPV 27,778 25,720 23,815 22,051 20,417 119,781 19,781 -100000 15000 15000 15000 15000 105000 13,889 12,860 11,907 11,025 71,461 121,143 21,143 24 Investment Profile NPV(A)>0 , r<16% • Comparing Investments A & B NPV(B)>NPV(A), r<9% \$70,000 \$60,000 \$50,000 \$40,000 \$30,000 \$20,000 \$10,000 2 0% 1 9% 18 % 17 % 16 % 15 % 14 % 13% 12% 11% 10% 9% 8% 7% 6%...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online