Net Present Value
marlas
net_present_value.docxThe below example is to be in Excel format.
Based on the information provided below, compute the Net Present Value of the project (CO 3). A Net Present Value Template is Attached. (Hint: Don't forget to update the discount rate to the amount required for this project and add your cash flow numbers.) Royal Dutch Shipping is planning on Investing $1,600,000 to buy a freighter. Prepare a net present value analysis based on the assumption that the freighter will be sold for 10% of its cost at the end of the year 5. Assume a 10% cost of capital. Annual operating cash flows for the project are: Year 1: $380,000 Year 2: $390,000 Year 3: $400,000 Year 4: $410,000 Year 5: $420,000
Prepare a loan amortization schedule based on monthly payments for the $1,600,000 if Royal Dutch Shipping can pay 10% down on a loan for $1,600,000 and can get a loan for 6% interest for 10 years (do not include this in your Net Present Value computations. This is a separate issue. (CO 3). (Hint: www.bankrate.com/calculators/mortgages/amortization-calculator.aspx )
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NPV example |
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Discount rate |
16% |
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Year |
Cash in (out) |
PV factors |
PV of cash flows |
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0 |
(80,000) |
1.0000 |
(80,000) |
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1 |
20,000 |
0.8621 |
17,241 |
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2 |
18,000 |
0.7432 |
13,377 |
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3 |
22,500 |
0.6407 |
14,415 |
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4 |
10,000 |
0.5523 |
5,523 |
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5 |
30,000 |
0.4761 |
14,283 |
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Net Present Value |
(15,161) |
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Internal rate of return |
7.81% |
