Question

Consider the following values for PV of All Benefits, PV of All Costs, and Yearly NPV for year 1-5 of an economic feasibility analysis worksheet, as indicated below:

	Yea 1	Year 2	Year 3	Year 4	Year 5
PV of All Benefits	1226	2432	3619	4789	5942
PV of All Costs	3274	4012	4718	5383	6011
Yearly NPV	2047	467	482	504	526
Commulitive NPV	?	?	?	?	?

1- Indicate the value for the Cumulative NPV for year 2?

2- Indicate the value for the Cumulative NPV for year 3?

3-- Indicate the value for the Cumulative NPV for year 4?

4- Indicate the value for the Cumulative NPV for year 5?

5- Indicate the return on investment for this project (percentage)?

6- Describe when will the break-down occur and why?

Answer 1

	Year 1	Year 2	Year 3	Year 4	Year 5
PV of All Benefits	1226	2432	3619	4789	5942
PV of All Costs	3274	4012	4718	5383	6011
Yearly NPV	2047	467	482	504	526
Commulative NPV	2047	2514	2996	3500	4026

1- Cumulative NPV for year 2 = 2047+467 = 2514

2- Cumulative NPV for year 3 = 2514+482 = 2996

3- Cumulative NPV for year 4 = 2996+504 = 3500

4- Cumulative NPV for year 5 = 3500+526 = 4026

5- Return on investment = Sum of Yearly NPVs / Sum of PV of Costs = 4026 / (3274+4012+4718+5383+6011) = 17.2 %