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    Discounted Cash Flow Activity 1

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    Gabrielle Ekhasomhi
    1. The document presents a discounted cash flow analysis of an investment over 10 years. 2. The payback period is the beginning of the 6th year, when the cumulative cash flow becomes positive. 3. A table shows the annual and cumulative net present value (NPV) of the investment, with NPV turning positive in year 8.

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    Discounted Cash Flow Activity 1

    Uploaded by

    Gabrielle Ekhasomhi
    16 views3 pages
    1. The document presents a discounted cash flow analysis of an investment over 10 years. 2. The payback period is the beginning of the 6th year, when the cumulative cash flow becomes positive. 3. A table shows the annual and cumulative net present value (NPV) of the investment, with NPV turning positive in year 8.

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    Business Economics

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    1. The document presents a discounted cash flow analysis of an investment over 10 years. 2. The payback period is the beginning of the 6th year, when the cumulative cash flow becomes positive. 3. A table shows the annual and cumulative net present value (NPV) of the investment, with NPV turning positive in year 8.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    16 views3 pages

    Discounted Cash Flow Activity 1

    Uploaded by

    Gabrielle Ekhasomhi
    1. The document presents a discounted cash flow analysis of an investment over 10 years. 2. The payback period is the beginning of the 6th year, when the cumulative cash flow becomes positive. 3. A table shows the annual and cumulative net present value (NPV) of the investment, with NPV turning positive in year 8.

    Copyright:

    © All Rights Reserved
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    of 3

    Discounted Cash Flow Activity 1

    April 02, 2015

    DISCOUNTED CASH FLOW ACTIVITY 1


    From the question given, the following Table 1 was generated;

    Cumulative
    Value of
    Investment

    Annual
    Income from
    Investment

    Discount
    Rate
    (3.3%)

    Discount
    Factor

    0.033

    0.968

    -100,000.00

    -96,805.42

    -96,805.42

    0.033

    0.937

    -843,416.06

    -940,221.48

    30,000,000

    1,300,000

    1,300,000

    0.033

    0.907

    -25,129,208.20

    -26,069,429.68

    47,000,000

    77,000,000

    2,500,000

    3,800,000

    0.033

    0.878

    -900,000.00
    27,700,000.00
    44,500,000.00

    -39,080,375.23

    -65,149,804.90

    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

    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

    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

    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

    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

    Capital
    Expenditure

    Operating
    Expenditure

    Annual
    Expenditure

    100,000

    100,000

    100,000

    900,000

    900,000

    1,000,000

    25,000,000

    4,000,000

    29,000,000

    36,000,000

    11,000,000

    50,000,000

    Year

    Page 1 of 3

    Cumulative
    ROI

    Net Annual
    Cash Flow

    Annual NPV

    Cumulative
    NPV

    Discounted Cash Flow Activity 1

    April 02, 2015

    1.

    Annual NPV
    40,000,000.00
    30,000,000.00
    20,000,000.00

    Payback Period Beginning of sixth year

    10,000,000.00
    0.00
    0

    -10,000,000.00
    -20,000,000.00
    -30,000,000.00
    -40,000,000.00
    -50,000,000.00

    The payback period is the beginning of the 6th year.

    2.
    Solution in Table 1

    Page 2 of 3

    10

    11

    Discounted Cash Flow Activity 1

    April 02, 2015

    3.

    Annual and Cumulative NPV


    60,000,000.00
    40,000,000.00
    20,000,000.00
    0.00
    0

    NPV turns
    positive 10
    8

    -20,000,000.00
    -40,000,000.00
    -60,000,000.00
    -80,000,000.00
    Annual NPV

    Cumulative NPV

    4.
    NPV becomes positive in the 8th year

    5.
    From the table 1;
    Cumulative NPV = 49,489,587.15

    Page 3 of 3

    12

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