A company is considering a new project with a life of 15 years. It requires an initial
investment of $5,000 payable immediately. In the first two years it will generate net cash inflow
of $2,000 per year receivable at the end of each year. After that its net cash inflows will be
$1,000 per year at the end of each of the next 13 years.
The company s cost of capital is 12% per year. ’
Task 1 6 marks
Non-discounted payback period (to the nearest year) _______ years
Net present value (to the nearest $100) $___________
Discounted payback period (to the nearest year ________years
For Non discounted payback I get three years and NPV is 8502-5000= 3502
I am not sure about Discounted payback which i got was 5 years.
Please help me on this>
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Investment Appraisal
3y ago#1Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers - it has answers and explanations.
Your non-discounted payback period and your NPV are correct.
The discounted payback period is calculated in exactly the same way as the non-discounted payback period except we use the discounted cash flows instead of the actual cash flows (as explained (with example) in my free lectures. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
how did you calculate NPV pls help
3y ago#3The cash flows are a follows:
0 (5,000)
1 - 2 2,000 per year
3 - 15 1,000 per year
These flows are discounted at 12% p.a. in the way that is explained in my free lectures on this.
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