In year 0, project A cash flows are as follows:
Year | CF | Year 0 | Formula |
-4 | 120 | 145.86 | FV(0.0488894854/12,4*12,,120) |
-3 | 120 | 138.91 | " |
-2 | 100 | 110.25 | " |
-1 | 80 | 84.00 | " |
0 | 60 | 60.00 | " |
1 | 40 | 38.10 | PV(0.0488894854/12,1*12,,40) |
Year 0 | 577.12 |
For Project 2, year 0 cash lows are as follows:
35+0+ A/(1+0.0488894854/12)^(2*12) +
1.07*A/(1+0.0488894854/12)^(3*12) +
1.07^2*A/(1+0.0488894854/12)^(4*12) +
1.07^2*A/(1+0.0488894854/12)^(5*12) = 577.12
A/(1+0.0488894854/12)^(2*12) + 1.07*A/(1+0.0488894854/12)^(3*12) +
1.07^2*A/(1+0.0488894854/12)^(4*12) +
1.07^2*A/(1+0.0488894854/12)^(5*12) = 542.12
A(38.73) = 542.12
A = 145.22
To check:
Year | CF | PV |
0 | 35 | 35.00 |
1 | 0 | 0.00 |
2 | 145.22 | 131.72 |
3 | 155.3854 | 134.23 |
4 | 166.2624 | 136.78 |
5 | 177.9007 | 139.39 |
Year 0 | 577.12 |
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