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hi sir
how to calculate the net preent value of the 10% pa with cash inflows of £500 per year for ten years and cash out flow of £300 every year.
so first we have to calclate the discounte factor of £500 for ten years using annuity table and then reduce this £300 cash outflows from total of NPV OR IT should be reduced and den applied annuity factor ??1
years cash inflows discount factor cash outflows
1 500 500*.909= 454.50 454.50-300=154.50
2 500 500*.826=413 413-300= 113
3 500 500* 0.751= 375.50 375.50-300= 75.50
4 500 500* 0.683=341.50 341.50-300=41.50
5 500 500* .621=310.50 310.50-300= 10.50
6 500 500*.564= 282 282-300= -18
7 500 500* .513 =256.50 256.50-300=-43.5
8 500 500*.467=233.50 233.50-300=-66.50
9 500 500*.424=212 212-300=-88
10 500 500*.386=193 193-300=-107NPV= 72
IS IT WRITE WAY IF NOT SIR CAN U EXPLAIN…
Thanks
The net cash inflow is 500 – 300 = 200 per year for 10 years.
The 10 year annuity discount factor at 10% is 6.145
So the PV of the flows is 200 x 6.145 = 1229
You have not written what the original cost is and so it is not possible to calculate the NPV.
You really should watch the free lectures on this!
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