Wonderful lecture Sir. Just a small observation. If you just calculate 1.05/1.15 you get 9.13%, rounded to 9%. Then you discount at 2.531 and the NPV is +31.86 which is much closer to the initial +32.

Hi Mr. Moffat, do we ever round down instead of up? For example, 9.52% becomes 10%, had it been 9.22 would it still round up to 10% or would we round down to 9%?

what will happen to the cash flows if they are different in each of the five years and these cash flows are before taken account of general inflation.
eg yr 1=10000, yr2=15000, yr 3 17000 and so on. inflation is at the rate of 6.2%.
Thanks

Arun says

In the alternative method isn’t the net operating flow 6 (20-16) instead of 60?

John Moffat says

No – it is 200 – 140 = 60

Kelly says

Wonderful lecture Sir. Just a small observation. If you just calculate 1.05/1.15 you get 9.13%, rounded to 9%. Then you discount at 2.531 and the NPV is +31.86 which is much closer to the initial +32.

Kelly says

Never mind. its clarified when we use the fomula

ahlaamzk says

Hi Mr. Moffat, do we ever round down instead of up? For example, 9.52% becomes 10%, had it been 9.22 would it still round up to 10% or would we round down to 9%?

John Moffat says

You round to the nearest – so 9.22 would be rounded to 9%

rabiatu says

what will happen to the cash flows if they are different in each of the five years and these cash flows are before taken account of general inflation.

eg yr 1=10000, yr2=15000, yr 3 17000 and so on. inflation is at the rate of 6.2%.

Thanks

John Moffat says

You use the same logic.

The actual cash flow at time 1 is 10,000 x 1.062

The actual cash flow at time 2 is 15,000 x 1.062^2

The actual cash flow at time 3 is 17,000 x 1.062^3