Exercise 31 Net Present Value Method and Annuity Method

The initial investment outlay of an investment project is €100,000. Use the following data:

Economic life: 5 years Liquidation value: €10,000

t

1

2

3

4

5

CIFt (€)

45,000

55,000

50,000

45,000

40,000

COFt (€)

15,000

15,000

20,000

25,000

30,000

Tab. 3-6: Cash inflows and outflows of the investment project Where:

CIFt = Current cash inflows in t COFt = Current cash outflows in t

The uniform discount rate is 5%. Is it a good idea to acquire this item? Ascertain:

a) The net present value.

b) Using a financing and redemption plan, the value that would arise if the item were to be wholly financed by internal funds.

c) The annuity.

Financial End Game

Financial End Game

How to profit from the global crisis and make big bucks big time! The current global financial crisis has its roots embedded in the collapse of the subprime markets in the United States. As at October 2007 there was an estimated loss on the subprime market of approximately 250 billion. If you want to come out on top, you have come to the right place.

Get My Free Ebook


Post a comment