Discounted Cash Flow Activity 2

(April 02, 2015

DISCOUNTED CASH FLOW ACTIVITY 2

From the question given, the following Table 1 was generated;

Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

Annual
Expenditure
50,000
2,000,000
10,000,000
15,000,000
7,000,000
2,000,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
700,000
2,000,000
500,000
12,000,000

Cumulative
Value of
Investment
50,000
2,050,000
12,050,000
27,050,000
34,050,000
36,050,000
36,550,000
37,050,000
37,550,000
38,050,000
38,550,000
39,050,000
39,550,000
40,250,000
42,250,000
42,750,000
54,750,000

Annual
Income
from
Investment
0
0
0
0
0
50,000
10,000,000
15,000,000
20,000,000
30,000,000
45,000,000
50,000,000
25,000,000
10,000,000
10,000,000
10,000,000
50,000

Cumulative
ROI
0
0
0
0
0
50,000
10,050,000
25,050,000
45,050,000
75,050,000
120,050,000
170,050,000
195,050,000
205,050,000
215,050,000
225,050,000
225,100,000

Discount
Rate
(4%)
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04
0.04

Page 1 of 4

Discount
Factor
0.962
0.925
0.889
0.855
0.822
0.790
0.760
0.731
0.703
0.676
0.650
0.625
0.601
0.577
0.555
0.534
0.513

Net Annual
Cash Flow
-50,000.00
-2,000,000.00
-10,000,000.00
-15,000,000.00
-7,000,000.00
-1,950,000.00
9,500,000.00
14,500,000.00
19,500,000.00
29,500,000.00
44,500,000.00
49,500,000.00
24,500,000.00
9,300,000.00
8,000,000.00
9,500,000.00
-11,950,000.00

Annual NPV
-48,076.92
-1,849,112.43
-8,889,963.59
-12,822,062.87
-5,753,489.75
-1,541,113.33
7,219,219.23
10,595,007.97
13,700,441.34
19,929,142.98
28,906,351.45
30,917,553.95
14,714,065.11
5,370,518.27
4,442,116.02
5,072,127.67
-6,134,810.29

Cumulative
NPV
-48,076.92
-1,897,189.35
-10,787,152.94
-23,609,215.80
-29,362,705.55
-30,903,818.87
-23,684,599.65
-13,089,591.68
610,849.67
20,539,992.65
49,446,344.10
80,363,898.06
95,077,963.17
100,448,481.44
104,890,597.46
109,962,725.13
103,827,914.84

Discounted Cash Flow Activity 2

(April 02, 2015

1.
Solution in Table 1

2.

Question 2
250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

0
0

10

12

14

16

-50,000,000
Annual Expenditure

Cumulative Value of Investment

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Annual Income from Investment

Cumulative ROI

18

Discounted Cash Flow Activity 2

(April 02, 2015

3.
a. Solution in Table 1
b.

Question 3b
250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

0
0

10

12

14

-50,000,000
Annual Expenditure

Cumulative Value of Investment

Annual Income from Investment

Cumulative ROI

Annual NPV

Cumulative NPV

Page 3 of 4

16

18

Discounted Cash Flow Activity 2

(April 02, 2015

4.
Annual NPV becomes positive in the 7th year. Payback Period is 7 years

5.
From the table 1;
Cumulative NPV = 103,827,914.84

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