Net Present Value

Year Project A Discount Factor (12%) Present Value

0 (900,000.00) 1.00 (900,000.00)
1 120,000.00 0.89 107,142.86
2 250,000.00 0.80 199,298.47
3 400,000.00 0.71 284,712.10
4 1,300,000.00 0.64 826,173.50
Net Present Value 517,326.93

Year Project B Discount Factor (12%) Present Value

0 (1,000,000.00) 1.00 (1,000,000.00)
1 400,000.00 0.89 357,142.86
2 400,000.00 0.80 318,877.55
3 400,000.00 0.71 284,712.10
4 400,000.00 0.64 254,207.23
Net Present Value 214,939.74

Payback
Project A Cummulative Cash Flow
Year 0 (900,000) (900,000)
Year 1 700,000 (200,000)
Year 2 100,000 (100,000)
Year 3 100,000 - 3 years
Year 4 1,300,000

Example Discounted Payback

Project A Discount rate Present value
Year 0 (900,000) 1 (900,000)
Year 1 700,000 0.833333333333333 583,333
Year 2 100,000 0.694444444444444 69,444
Year 3 100,000 0.578703703703704 57,870
Year 4 1,300,000 0.482253086419753 626,929
Cummulative Cash Flow
(900,000)
(316,667)
(247,222)
(189,352)
437,577 3 years -0.302031 3.3 years