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Mock exam question – 31 about NPV
Intial cost $300,000, 5 years, cost of capital 10%
Estimated scrap value $20,000
Addition revenue $120,000 every year
I am unable to understand that how to calculate this with revenue. If you can please help me out that will be really great?
Thank you
Outflow at time 0: (300,000)
Net inflow of 90,000 per year (120,000 – 30,000) for 5 years, so multiply 90,000 by the 5 year annuity discount factor at 10%.
Inflow at time 5 of 20,000, so multiply 20,000 by the present value factor for 5 years at 10%.
(I assume that you have watched our free lectures on how to do the discounting?)
Thank you it’s make so much easy now!!!!
Thank you once again
You are welcome 🙂