Question

A 30 year project is estimated to cost $35 million and provide annual cash flows of $5 million per year in years 1-5; $4 million per year in years 6-20 and $2 million per year in years 21-30. If the company's required rate of return is 10%, determine the NPV.

Answer 1

		i	ii	iii=i*ii
	Year	Cash flow in million	PVIF @ 10%	Present value
	0	-35	1	$ (35.00)
	1	5	0.909091	$     4.55
	2	5	0.826446	$     4.13
	3	5	0.751315	$     3.76
	4	5	0.683013	$     3.42
	5	5	0.620921	$     3.10
	6	4	0.564474	$     2.26
	7	4	0.513158	$     2.05
	8	4	0.466507	$     1.87
	9	4	0.424098	$     1.70
	10	4	0.385543	$     1.54
	11	4	0.350494	$     1.40
	12	4	0.318631	$     1.27
	13	4	0.289664	$     1.16
	14	4	0.263331	$     1.05
	15	4	0.239392	$     0.96
	16	4	0.217629	$     0.87
	17	4	0.197845	$     0.79
	18	4	0.179859	$     0.72
	19	4	0.163508	$     0.65
	20	4	0.148644	$     0.59
	21	2	0.135131	$     0.27
	22	2	0.122846	$     0.25
	23	2	0.111678	$     0.22
	24	2	0.101526	$     0.20
	25	2	0.092296	$     0.18
	26	2	0.083905	$     0.17
	27	2	0.076278	$     0.15
	28	2	0.069343	$     0.14
	29	2	0.063039	$     0.13
	30	2	0.057309	$     0.11
	NPV =			$     4.67
	answer =			$     4.67	million