Professional Documents
Culture Documents
Case Study Illinois
Case Study Illinois
Ct
NPV C0
(1 r ) t
C1 C2 Ct
NPV C0 ...
(1 r ) (1 r )
1 2
(1 r ) t
Net Present Value
Terminology
C = Cash Flow
t = time period of the investment
r = opportunity cost of capital
-1 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 500% 550%
-6
capital of 11%?
Year Frying Frogs Lizards Leaping over Frogs
0 4,000 6,000
1 1,000 900
2 1,000 700
3 700
4 700
Year 0 1 2 3
Sun-Blocker (50) 60 60
Fog-Maker (30) 40 40
40
Find NPV and Equivalent
Annual Annuity
net present value
Equivalent annual annuity =
annuity factor