CIMA BA1 Discounting and Net present values

Comments

1. Ken Garrett says

   May 9, 2018 at 9:27 pm

   For a perpetuity, the discount factor is 1/r. Here 1/0.09 = 11.1111

   PV of income = 1.111 x 5670 = 63,000
   NPV = 63,000 – 50,000 = 13,000

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2. olawaleoke says

   May 9, 2018 at 4:46 pm

   Can you please explain how they arrived at the answer given
   A company is considering investing $50,000 in a project which will yield $5,670 per
   annum in perpetuity. The company’s cost of capital is 9% per annum.
   Required:
   Calculate the net present value of the project.

   answer is $13,000

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