Hey, thanks for your question. I have provided some examples for you to follow. I hope they are enough to solve your problem:
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Initial outlay = $200,000
If r = 0%, NPV = $200,000 + 50,000 + 50,000 - 200,000 = $100,000
If r = 5%, NPV = +$65,730
IRR = 18%
MIRR @ 5% = 15.43%
PV of outflows = $200,000
FV of inflows = $50,000 (1 + 0.05)2 + $50,000 (1 + 0.05) + $200,000 = $307,625
FV = PV (1 + r)n
$307,625 = $200,000 (1 + MIRR)3
2. Initial outlay is $50,000.
This project will have two values that cause the NPV to be equal to zero: 0% and approximately 41.5%. Neither is meaningful for decision-making: For discount rates below 0%, the net present value is negative; for discount rates above 0% but below 41 .5%, the net present value is positive; for discount rates above 41.5%, the net present value is negative.
NPV = $1,938.24 = -$50,000 + $47,619 + $90,703 - $86,384
3. 0.96 = $x/$1,000,000
NPV = $960,000 - $1,000,000 = -$40,000
Similar Question
Year Cash flow
0 - $800,000
1 90,000
2 190,000
3 +$900,000
If the discount rate is 0%, what is the project's net present value?
If the discount rate is 6%, what is the project's net present value?
What is this project's internal rate of return?
Solution
If the discount rate is 0%, what is the project's net present value?
A discount rate of 0% means that future cash flows are worth the same
as present cash flows. Thus, we take the sum of the revenues in years
1 through 3 and subtract the initial investment that took place in year 0.
($90,000 + $190,000 + $900,000) - $800,000
= $1,180,000 - $800,000
= $380,000
The NPV is therefore $380,000.
If the discount rate is 6%, what is the project's net present value?
In this case, the present value of a cash flow C in year N is
C / (1.06^N)
where the divisor is 1.06 to the power of N. We begin by calculating
the present value of the revenue in each of the years 1 through 3.
Year revenue divisor present value
1 $90,000 1.06^1 = 1.06 $90,000 / 1.0600 = $84,905.66
2 $190,000 1.06^2 = 1.1236 $190,000 / 1.1236 = $169,099.32
3 $900,000 1.06^3 = 1.1910 $900,000 / 1.1910 = $755,667.51
Now we take the sum of the present values and subtract the initial
investment.
($84,905.66 + $169,099.32 + $755,667.51) - $800,000
= $1,009,672.49 - $800,000
= $209,672.49
So the NPV is $209,672.49.
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