question archive Calculate nob using cash flow projections A&G Ltd
Calculate nob using cash flow projections A&G Ltd
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Calculate nob using cash flow projections
A&G Ltd. is a housing company, intending to undertake a new project, required $255,460 of initial investment. The cost of capital for this project is estimated at 11% per annum. A consultant of A&G Ltd. has come up with the following cash flow projections: Cash flows/Years 2021 2022 2023 2024 2025 2026 Cash inflows (E) 68,540 82,920 120,360 180,560 210,450 260,460 Cash outflows ({) 72,650 98,470 90,250 95,780 100,350 105,780 As the Finance Director of A&G Ltd., you are required to: a) Appraise the proposed project using the Net Present Value (NPV) technique [30 Marks]
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NPV = (-) 45,882.81
Step-by-step explanation
Calculation of NPV of new Project Year Cash Inflow Cash Outflow Net Cash Flow PVF @ 11% Present Value 0 -255,460 O -255,460 1 -255,460.00 1 68,540 72,650 -4,110 0.901 -3,702.70 2 82,920 -98,470 15,550 0.812 -12,620.73 3 120,360 -90,250 30,110 0.731 22,016.17 4 180,560 -95,780 84,780 0.659 55,847.21 5 210,450 -100,350 110,100 0.593 65,338.99 260,460 -105,780 154,680 0.535 82,698.24 Net Present Value -45,882.81 Project should not be undertaken since it has negative NPV
Please see attached file
