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The ABC Corp. is evaluating a proposal for a new project. It will cost RM55,000 to...

The ABC Corp. is evaluating a proposal for a new project. It will cost RM55,000 to get the undertaking started. The project will then generate cash inflows of RM21,000 in its first year and RM17,000 per year in the next five years after which it will end. ABC uses an interest rate of 9% compounded annually for such evaluations. Calculate the “Net Present Value” (NPV) of the project by treating the initial cost as a cash outflow (a negative) in the present, and adding the present value of the subsequent cash inflows as positives

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Calculation of net present value of project using interest rate of 9% compounded annually
Year Cash flow Discount Factor @ 9% Present Value
0 -RM55,000.00         1.000 -RM55,000.00
1 RM21,000.00         0.917 RM19,266.06
2 RM17,000.00         0.842 RM14,308.56
3 RM17,000.00         0.772 RM13,127.12
4 RM17,000.00         0.708 RM12,043.23
5 RM17,000.00         0.650 RM11,048.83
6 RM17,000.00         0.596 RM10,136.54
Net Present Value RM24,930.34
The “Net Present Value” (NPV) of the project = RM24,930.34

jeff jeffy answered 2 years ago
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