NPV Help

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spurschic1@yahoo.com
spurschic1@yahoo.com Registered Posts: 94 Regular contributor ⭐
in AAT Level 3 (Level 6 in Scotland)
Hi,

I am doing a test and have the following question:

Calculate the NPV of the project at company cost of capital 15%. I have the details of the cost of the equipment, estimated savings for 4 years and discounted cash flow for 6 years.

Any idea how I work out the NPV? I've been through text book so many times now I'm lost!

Thanks! :001_smile:

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  • visha
    visha Registered Posts: 218 Dedicated contributor 🦉
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    You query does not give full details to be able to demonstrate how to work out NPV.

    Normally NPV is work out on any additional cash inflow generated as a result of investment.

    However, I have assumed certain figures and worked on the net savings figure. With my assumed figures I am getting a negative NPV of £20,000.

    Look at my calculations in the attached file, and I hope this helps you to understand NPV


    .Attachment not found.

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