In: Accounting
1
Assume that a project has a starting cost of $300,000 in year 1.
$40,000 each year in Year 2, 3, and 4. Estimated benefits of the
project are $0 in Year 1 and $ 120,000 each year in Year 2, 3, and
4. Use a discount rate of 7% and round the discount rate into two
decimal points.
Calculate the NPV for this project.
calculate the project ROI.
Caluclation of the NPV of the Project;
I | II | III = I+II | IV | V = III*IV | |
Year | Cash out flow | Cash in flow | Net amount | PVF @ 7% | Present Value |
1 | -3,00,000 | - | -3,00,000 | 0.94 | -2,82,000 |
2 | -40,000 | 1,20,000 | 80,000 | 0.87 | 69,600 |
3 | -40,000 | 1,20,000 | 80,000 | 0.82 | 65,600 |
4 | -40,000 | 1,20,000 | 80,000 | 0.76 | 60,800 |
NPV Of the Project | -86,000 |
ROI = (Return-Investment) / Investment
I | II | III | IV = I * II | V = I * III | |
Year | PVF @ 7% | Cash out flow | Cash in flow | Investment | Return |
1 | 0.94 | 3,00,000 | - | 2,82,000 | - |
2 | 0.87 | 40,000 | 1,20,000 | 34,800 | 1,04,400 |
3 | 0.82 | 40,000 | 1,20,000 | 32,800 | 98,400 |
4 | 0.76 | 40,000 | 1,20,000 | 30,400 | 91,200 |
3,80,000 | 2,94,000 |
ROI = (294000-380000) / 380000 = -22.63%