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¶ … Value
PV = $15,000 / (1+.07)^1 = $14,018.69.
At 4%, this is $15,000 / (1.04) = $14,423.08
The PV of Account A is 6500 / 1.06 = $6,132.07. The PV of Account B. is 12,600 / (1.06)^2 = $11,213.96
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NPV
The present value of the entire income stream is $168,459,500.
Income
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NPV
Income
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NPV
What this example shows is that the net present value of a future cash flow increases with a lower discount rate. The reason for this is that a lower discount rate means the less purchasing power of the future cash flow is diminished. So in...
The project's NPV at a discount rate of 0% is $670,000
The project's NPV at a discount rate of 2% is $614,353
The project's NPV at a discount rate of 6% is $514,815
The project's NPV at a discount rate of 11% is $408,997
The project's modified internal rate of return is 28% at the 11% reinvest rate. If the reinvest rate is 6%, the MIRR is 33%, and if the project's reinvest rate is 2%, then the MIRR is 37%.
The graph shows that the rate of return for this to deliver an even net present value is very high -- around 45%. At any…
Works Cited:
Anthes, G. (2003) ROI guide: Net present value, retrieved August 2008 from: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=78530
Investopedia. (2011). Profitability index. Investopedia. Retrieved November 7, 2011 from http://www.investopedia.com/terms/p/profitability.asp
McCracken, M. (n.d). Capital Budgeting. Retrieved August 2, 2007 from: http://teachmefinance.com/capitalbudgeting.html
Time Value of Money: Self Paced Overview. (n.d.). Retrieved January 10, 2011 from: http://www.studyfinance.com/lessons/timevalue/index.mv
Value A."Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%?" PV at 7% =$15,000/1.07 =$14,018.69 With a discount rate of 7.00% of the bank account and a span of 1 year, the projected cash flows
It is worth noting that after three years, another machine will need to be purchased. This cost should be included (i.e. The costs for years 4 and 5) in order to adequately assess the full cost difference between the two machines. After three years, Machine 2 still has a worse NPV than does Machine a, which implies to that point that Machine a is still better. The future decision
NPV The net present value calculation is the best way to make a capital budgeting decision. NPV takes the incremental cash flows from a project and then discounts them to present-day dollars. This technique allows managers to not only identify the incremental cash flows associated with a project, but also allows them to discount future cash flows to present day, so as to account for the effects of inflation. In this case,
Finance To evaluate the project for T-Mobile, we need to take into account the present-day value of future cash flows. This means that the future cash flows need to be discounted. The case example gives both the future cash flows and the discount rate for T-Mobile, which is the company's cost of capital. The net present value calculation relies on the following equation: PV of CF = CF1 / (1+r) 1 +
Quantity = 3000 X 120% = 3,600 SP = 50 x 110% = 55 Quantity x SP = 198,000 Less: Returned Sales = (6%x198,000) Sales Projection = $186,120 Beginning Inventory $21 X 400 = 8400 Production $24 X 800 = 19200 Cost of Goods Sold 700 units FIFO (21 X 400) + (24 X 300) = $15,600 Beginning Inventory $10 X 725 = 8400 Production $14 X 650 = 19200 Cost of Goods Sold 700 units LIFO (14 X 650) + (10
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