define i = interest rate = 0.12
multiply each cashflow by (1+i)^{-t} where t is the year in which the cashflow occurs. Add the results up, this is the Net present value.
here are the first few cashflows:
MTG is considering replacing part of its computer network with the latest equipment. The relevant costs of the project and the corresponding savings are given below.
Year = 0
Net cash flow ($) = -100,000
Year = 1
Net cash flow ($) = 20,000
Year = 2
Net cash flow ($)= 30,000
Year = 3
Net cash flow ($) = 40,000
Year = 4
Net cash flow ($) = 50,000
Year = 5
Net cash flow ($) = 20,000
If the current cost of interest in 12% per annum on projects of this type. Calculate the net present value of the project and comment on the course of action to be taken.
Obtain also the NPV for a cost of interest of 20% and thus estimate the Internal Rate of Return.
I seriously do not know how to do this...Please help me....