Note: Please note that the image is not clear, I am not sure about the useful life of the asset 5 years. If the useful life of the asset is other than 5 years, | |||||||||
please inform me in the comment box, I will change the answer accordingly. | |||||||||
a) | NPV@ 10% | ||||||||
Year | Particular | Cashflow | Discounting Factor @10% | Discounted Cash Flow | |||||
a | b | c | d | e=d*c | |||||
0 | Initial Cost Of Equipment | $ -5,00,000 | 1.0000 | $ -5,00,000.00 | |||||
1 | Annual Cash Inflows | $ 50,000 | 0.9091 | $ 45,454.55 | |||||
2 | Annual Cash Inflows | $ 50,000 | 0.8264 | $ 41,322.31 | |||||
3 | Annual Cash Inflows | $ 50,000 | 0.7513 | $ 37,565.74 | |||||
4 | Annual Cash Inflows | $ 50,000 | 0.6830 | $ 34,150.67 | |||||
5 | Annual Cash Inflows | $ 50,000 | 0.6209 | $ 31,046.07 | |||||
NPV | $ -3,10,461 | ||||||||
Therefore NPV = $-310461 | |||||||||
b) | NPV@ 15% | ||||||||
Year | Particular | Cashflow | Discounting Factor @15% | Discounted Cash Flow | |||||
a | b | c | d | e=d*c | |||||
0 | Initial Cost Of Equipment | $ -5,00,000 | 1.0000 | $ -5,00,000.00 | |||||
1 | Annual Cash Inflows | $ 50,000 | 0.8696 | $ 43,478.26 | |||||
2 | Annual Cash Inflows | $ 50,000 | 0.7561 | $ 37,807.18 | |||||
3 | Annual Cash Inflows | $ 50,000 | 0.6575 | $ 32,875.81 | |||||
4 | Annual Cash Inflows | $ 50,000 | 0.5718 | $ 28,587.66 | |||||
5 | Annual Cash Inflows | $ 50,000 | 0.4972 | $ 24,858.84 | |||||
NPV | $ -3,32,392 | ||||||||
Therefore NPV = $-332392 |
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