Q4 December 2012 (a)

The question says that there are sales of 300,000 units a year at a selling price of $14, so the annual revenue is 4,200,000. Also in the question it says that the relevant costs are 3,230,000 per year. So the annual net cash flow = 4,200,000 - 3,230,000 = 970,000

Thanks sir.

How 5100,000 value is calculated?

But the examiners has shown the workings in the line above. It is the 970,000 a year net cash flows, multiplied by 7.191 (which is the 15 year annuity discount factor at 11% because there are 15 years of flows), multiplied by (1/11)^3, which is the normal 3 year discount factor for 3 years at 11% (because the flows start three years late - at time 4 instead of time 1).