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Sacramento Paper: Net Present Value

This document contains cash flow information for two potential projects. The first project has a positive net present value of $1,276.78 at a 25% rate of return, indicating the project should be accepted. The second project has an internal rate of return of 19% which is greater than the 15% cost of capital, also indicating the project should be accepted. Both projects are deemed financially viable based on their positive net present values or internal rates of return exceeding the cost of capital.

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Harish Yadav
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32 views2 pages

Sacramento Paper: Net Present Value

This document contains cash flow information for two potential projects. The first project has a positive net present value of $1,276.78 at a 25% rate of return, indicating the project should be accepted. The second project has an internal rate of return of 19% which is greater than the 15% cost of capital, also indicating the project should be accepted. Both projects are deemed financially viable based on their positive net present values or internal rates of return exceeding the cost of capital.

Uploaded by

Harish Yadav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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SACRAMENTO PAPER

Year Cash Flow Present Value Rate of Return 25%


0 -$12,000.00 -$12,000.00
1 $4,200.00 $3,360.00
2 $4,200.00 $2,688.00
3 $4,200.00 $2,150.40
4 $4,200.00 $1,720.32
5 $4,200.00 $1,376.26
6 $4,200.00 $1,101.00
7 $4,200.00 $880.80

$1,276.78
Net Present Value
$1,276.78

Since, NPV is positive so we can accept the project.


Positive value of NPV indicates that earning from the project is more
than the amount invested in the project, so the project is acceptable.

Year Cash Flow


0 -$300,000.00
1 $60,000.00
2 $60,000.00
3 $60,000.00
4 $60,000.00
5 $60,000.00
6 $60,000.00
7 $60,000.00
8 $60,000.00
9 $60,000.00
10 $60,000.00
11 $60,000.00
12 $60,000.00
13 $60,000.00
14 $60,000.00
15 $60,000.00
16 $60,000.00
17 $60,000.00
18 $60,000.00
19 $60,000.00
20 $60,000.00

IRR 19%

Since,IRR is greater than Cost of Capital i.e. 15%


So,we can accept the investment.

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