Calculating Net Present Value (NPV) from cash flows
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You are the finance manger of ABC Co. The Chief Executive is desirous of investing in a new venture. Preliminary findings and investigations have indicated that the venture might enhance the social corporate responsibility of the organization by creating employment.
However, whether the project would be profitable or not has not been determined. The Chief Executive has therefore requested your assistance in evaluating the project. You have been requested the evaluate the net present value (NPV), and Internal Rate of Return (IRR) of the project. The relevant rate is 9%. The cash flows are presented below:
Year Cash flow
20x1 -$1,000,000
20x2 $30,000
20x3 $400,000
20x4 $200,000
20x5 $250,000
20x6 -$60,000
20x7 $250,000
20x8 $200,000
20x9 $100,000
20x10 $200,000
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Solution Summary
The solution provides an easy and intuitive tool for computing Net Present Value as a tool for decision-making.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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