In: Finance
Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the present value of the anticipated revenues? Acme uses an interest rate of 20%.
Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the equivalent annual amount for the anticipated revenues? Acme uses an interest rate of 20%.
Loselt | ||||||
Discount rate | 0.2 | |||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | 0 | 1.1 | 1.265 | 1.45475 | 1.6729625 | 1.923907 |
Discounting factor | 1 | 1.2 | 1.44 | 1.728 | 2.0736 | 2.48832 |
Discounted cash flows project | 0 | 0.916667 | 0.878472 | 0.841869 | 0.8067913 | 0.773175 |
NPV = Sum of discounted cash flows | ||||||
NPV Loselt = | 4.22 | |||||
Where | ||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor | |||||
Equvalent annuity(EAA)= | 1.411082 | |||||
Required rate = | 0.2 | |||||
Year | 0.00% | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | 0 | 1.411082 | 1.411082 | 1.411082 | 1.4110823 | 1.411082 |
Discounting factor | 1 | 1.2 | 1.44 | 1.728 | 2.0736 | 2.48832 |
Discounted cash flows project | 0 | 1.175902 | 0.979918 | 0.816599 | 0.6804988 | 0.567082 |
Sum of discounted future cashflows = | 4.22 | |||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor |