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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 yearI 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?)
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Thank you it’s make so much easy now!!!!
Thank you once again
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