Posted: 2/23/2011 1:06:53 PM EDT
|
I have a problem I am doing, and I need to see if I am doing this correct.
Question is as follows; A four year financial project is forecast to have net cash inflows of $20,000, $25,000, $30, 000, and $35,000 in the next four years. It will cost $75,000 to implement the project payable at the beginning of the project. The required rate of return is 0.2, conduct a discounted cash flow calculation to determine the NPV. I am coming up with $6,732 Does this sound correct? Thanks Aviator |
|
Your instincts are right. That sounds way too low.
ETA: Oh, wait, you're doing NET cash flow, 75K out, and 85K back in over a few years. In that case, your number could be close. Just remember to get your Beginning Of Year and End Of Year calcs sorted out. The down payment is at the beginning of the year; all the others are presumed to be at the end of the year. What tool are you using? Pocket calculator? HP12? Excel? |
|
Quoted:
I have a problem I am doing, and I need to see if I am doing this correct. Question is as follows; A four year financial project is forecast to have net cash inflows of $20,000, $25,000, $30, 000, and $35,000 in the next four years. It will cost $75,000 to implement the project payable at the beginning of the project. The required rate of return is 0.2, conduct a discounted cash flow calculation to determine the NPV. I am coming up with $6,732 Does this sound correct? Thanks Aviator Actually, the answer is negative $6,732.65 
Remember it's Net, so it is the value of the discouted stream less the initial investment. |
