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Assume the following values: One-time transaction for a sale of $250,000 COGS associated with the sale...

Assume the following values:

One-time transaction for a sale of $250,000

COGS associated with the sale $100,000

Operating cycle =60 days

DPO= 15 days

Discount Rate = 8%

What is the NPV associated with the transaction?

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Answer #1

The NPV associated with the transaction is computed as shown below:

= - COGS / [ 1 + ( discount rate / 365) x 15 ]

= - $ 100,000 / [ 1 + ( 0.08 / 365 ) x 15 ]

= - $ 99,672.31021 Approximately

= Sale / [ 1 + ( discount rate / 365 ) x 60 ]

= $ 250,000 / [ 1 + ( 0.08 / 365 ) x 60 ]

= $ 246,755.00 Approximately

So the NPV will be:

= $ 246,755.00 - $ 99,672.31

= $ 147,082.69  

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