ECR June 2009 Answers
jewels.p
Registered Posts: 1,774
I am trying to master Discounted Cash Flows and N.P.V at the moment. (Quiet at work this week so trying to study a lot). I had a look at June's question on this to see if it helped me any. The N.P.V for Year 0 is £39.72 I don't understand this at all!
How do you calculate Year 0?
Thanks
How do you calculate Year 0?
Thanks
0
Comments

I am trying to master Discounted Cash Flows and N.P.V at the moment. (Quiet at work this week so trying to study a lot). I had a look at June's question on this to see if it helped me any. The N.P.V for Year 0 is £39.72 I don't understand this at all!
How do you calculate Year 0?
Thanks
i think i remember this did you add on the £50 inputted capital ?0 
In my tutorial notes it says the difference between the Total Discounted Cash Flow and the Initial Cost is the NPV. Therefore I make it Year 0  (400) Year 1 131.58 Year 2 173.14 Year 3 101.25 making a total of 5.97. The Capital Expenditure is 400 and it was sold for 50
(Above figures are in £000)0 
Hello,
I couldn't see any model answers but yours look all correct to me (Yr 0 Being 400 * 1.000), other than Yr 3.
For Yr 3 I would have included the disposal proceeds of 50, as it is an incremental cash flow relevant to the investment  that would make the Net Cash flow 200 * 0.675 = 135.
Hope this helps0 
And by adding the discounted value of the proceeds of the disposal, your NPV is pretty much the same as £39.72 (thousand)0

Thanks for your help
Julie0
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