Question

Sun National Bank is considering adding a new branch bank. They know that it will cost $1.25 million to build the branch and they believe that it will generate $220,000 per year for the next 30 years. Sun National Bank requires a return of 10% on all new projects it undertakes. What is this project’s net present value? (10 points) (Show all calculations for full credit. Simply entering a single value will earn no credit.)

Answer 1

Calculation of NPV:
Time	Cashflow	PVF @10%	PV
-	-1250000	1.00	-12,50,000.00
1.00	220000	0.9091	2,00,000.00
2.00	220000	0.8264	1,81,818.18
3.00	220000	0.7513	1,65,289.26
4.00	220000	0.6830	1,50,262.96
5.00	220000	0.6209	1,36,602.69
6.00	220000	0.5645	1,24,184.26
7.00	220000	0.5132	1,12,894.79
8.00	220000	0.4665	1,02,631.62
9.00	220000	0.4241	93,301.48
10.00	220000	0.3855	84,819.52
11.00	220000	0.3505	77,108.66
12.00	220000	0.3186	70,098.78
13.00	220000	0.2897	63,726.16
14.00	220000	0.2633	57,932.88
15.00	220000	0.2394	52,666.25
16.00	220000	0.2176	47,878.41
17.00	220000	0.1978	43,525.83
18.00	220000	0.1799	39,568.93
19.00	220000	0.1635	35,971.76
20.00	220000	0.1486	32,701.60
21.00	220000	0.1351	29,728.73
22.00	220000	0.1228	27,026.11
23.00	220000	0.1117	24,569.19
24.00	220000	0.1015	22,335.63
25.00	220000	0.0923	20,305.12
26.00	220000	0.0839	18,459.20
27.00	220000	0.0763	16,781.09
28.00	220000	0.0693	15,255.54
29.00	220000	0.0630	13,868.67
30.00	220000	0.0573	12,607.88
			8,23,921.18
NPV is $823921.18