Question

I need a NPV calculation. I just want to make sure I got it correct.

Initial Cost at t=0 is $150

rate = 16%

growth rate in perpetuity after year 5 at 1.5%

Year	1	2	3	4	5
Cash Flow	5	11.4	14	21	28

Answer 1

NPV will be net of present value of all free cash flows incurred from project. Cash flows will include initial investment, operating cash flows and terminal value. Sum of present value of free cash inflows is net with outflows. Result is NPV.
Initial investment				150
(Cash flows in year 0)=				-150
Discount rate			16% OR	0.16
Cash flows at end of 5th year				28
Growth rate after 5th year in perpetuity			1.5% OR	0.015
Cash flows in 6th year		28*(1+0.015)		28.42
Terminal value formula
Terminal value at end of 5th year = Cash flows for 6th year/(Discount rate - growth rate)
28.42 /(0.16 -0.015)
196
Calculation of NPV
Year	Cash flows	P.V.F.@16%	Present value of cash flows
0	-150	1	-150
1	5	0.8620689655	4.310344828
2	11.4	0.7431629013	8.472057075
3	14	0.6406576735	8.96920743
4	21	0.5522910979	11.59811306
5	28	0.4761130154	13.33116443
5 (Terminal value)	196	0.4761130154	93.31815102
			________
NPV =			-10.00096216
			________
So, NPV is -10.00. Project is not acceptable.