Results 1 to 4 of 4

Math Help - Need help in Present Value and Investment Appraisal problem question

  1. #1
    Newbie
    Joined
    May 2011
    Posts
    4

    Need help in Present Value and Investment Appraisal problem question

    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....
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    Joined
    May 2010
    Posts
    1,028
    Thanks
    28
    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:
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Newbie
    Joined
    May 2011
    Posts
    4
    Quote Originally Posted by SpringFan25 View Post
    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:
    Hi is the method u give same as PV = V/(1+ i)^t ?
    Coz if i used your method, the equal is not the same with the method given. So which method should i use? Yours or the above?
    Follow Math Help Forum on Facebook and Google+

  4. #4
    MHF Contributor
    Joined
    May 2010
    Posts
    1,028
    Thanks
    28
    if "V" is the size of the cashflow, then your formula is the same as mine. Show your calculations if you think they're different
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Investment Question
    Posted in the Business Math Forum
    Replies: 1
    Last Post: July 15th 2010, 08:15 PM
  2. Investment Question
    Posted in the Pre-Calculus Forum
    Replies: 1
    Last Post: May 18th 2009, 12:36 AM
  3. Another investment question
    Posted in the Algebra Forum
    Replies: 1
    Last Post: January 13th 2009, 05:45 PM
  4. Investment Question
    Posted in the Math Topics Forum
    Replies: 1
    Last Post: September 22nd 2008, 05:00 PM
  5. investment question
    Posted in the Math Topics Forum
    Replies: 1
    Last Post: April 10th 2008, 04:32 AM

Search Tags


/mathhelpforum @mathhelpforum