1.

Consider a project which has an initial cost of $1,150, and seven subsequent
cash flows. The initial cash flow is 234, the growth rate g = 10%, and the discount rate
r = 15%. What is the project’s NPV & IRR? Analyze the sensitivity of the project’s NPV to the
discount rate & to the growth rate ?

INPUTS
CF0 1,150.00
CF1 234
G 10%
R 15.00%

OUTPUTS
YEAR 0 1 2 3 4 5 6 7
CF (1,150.00) 234.00 257.40 283.14 311.45 342.60 376.86 414.55

NPV 101.46
IRR 17.60%

Data table
NPV IRR
101.46 17.60%
0%
Gr

5%
ow

10%
th
r
ate

15%

DISCOUNT RATE
101.46 7% 10%
0%
Gr

5%
ow

10%
th
r

15%
ate

DISCOUNT RATE
101.46 0% 5%
7%
Gr

10%
ow

12%
th
ater
15%
 uent
iscount rate
oject’s NPV to the

SCOUNT RATE DISCOUNT RATE

12% 15% 17.60% 7% 10% 12% 15%
0%
Gr

5%
ow

10%
th
r

15%
ate

SCOUNT RATE
10% 15%
2. Consider a project which has an initial cost of $1,150, and seven subsequent
cash flows. The initial cash flow is 300, the growth rate g = 12%, and the discount rate
r = 16%. What is the project’s NPV & IRR? Analyze the sensitivity of the project’s NPV to
the discount rate & to the growth rate ?

INPUTS
CF0 1,150
CF1 300
G 12%
R 16.00%

OUTPUTS
YEAR 0 1 2 3 4 5 6 7
CF (1,150.00) 300.00 336.00 376.32 421.48 472.06 528.70 592.15

NPV 483.47
IRR 27.64%

Gr
ow
th
ater

IRR
DATA TABLE
DISCOUNT RATE
27.64% 12% 14% 16% 18% 20% 22%
0%
2%
4%
6%
8%
Gr
ow

10%
th

12%
r
ate
14%
16%
18%
20%
 NPV
DATA TABLE
DISCOUNT RATE
483.47 12% 14% 16% 18% 20% 22%
0%
2%
4%
6%
8%
Gr
ow

10%
th

12%
ater

14%
16%
18%
20%
PHƯƠNG PHÁP KHẤU HAO THEO ĐƯỜNG THẲNG (STRAIGHT LINE)

Nguyên giá 100,000,000.00 Gía trị khấu hao=(nguyên giá-giá trị thanh lý)/thời gian khấu h
Giá trị thanh lý 6,000,000.00
Thời gian KH 5 0
Hàm SLN ()
Mức khấu hao
Giá trị còn lại 100,000,000.00
PHƯƠNG PHÁP KHẤU HAO NHANH (SUM OF YEARS DIGITS)

Nguyên giá 100,000,000.00

Giá trị thanh lý 6,000,000.00 Thời gian sử dụng còn lại
Thời gian KH 5 0
Tổng số năm sd còn lại 15 Hàm SYD ()
Tỷ lệ khấu hao
Mức khấu hao
Giá trị còn lại 100,000,000.00

PHƯƠNG PHÁP KHẤU HAO SỐ DƯ GIẢM DẦN (DECLINING BALANCE)

Nguyên giá 100,000,000.00

Giá trị thanh lý 6,000,000.00
Thời gian KH 5 0
Hàm DB ()
Tỷ lệ khấu hao
Mức khấu hao
Giá trị còn lại 100,000,000.00

PHƯƠNG PHÁP KHẤU HAO SỐ DƯ GIẢM GẤP ĐÔI (DOUBLE DECLINING BALANCE)

Nguyên giá 100,000,000.00

Giá trị thanh lý 6,000,000.00
Thời gian KH 5 0
Hệ số KH nhanh 2 Hàm DDB ()
Tỷ lệ khấu hao
Mức khấu hao
Giá trị còn lại 100,000,000.00
trị thanh lý)/thời gian khấu hao

1 2 3 4 5
$18,800,000.00 $18,800,000.00 $18,800,000.00 $18,800,000.00 $18,800,000.00
18,800,000.00 18,800,000.00 18,800,000.00 18,800,000.00 18,800,000.00
81,200,000.00 62,400,000.00 43,600,000.00 24,800,000.00 6,000,000.00

5 4 3 2 1
1 2 3 4 5
$31,333,333.33 $25,066,666.67 $18,800,000.00 $12,533,333.33 $6,266,666.67
0.3333 0.2667 0.2000 0.1333 0.0667
31,333,333.33 25,066,666.67 18,800,000.00 12,533,333.33 6,266,666.67
68,666,666.67 43,600,000.00 24,800,000.00 12,266,666.67 6,000,000.00

1 2 3 4 5
$43,000,000.00 $24,510,000.00 $13,970,700.00 $7,963,299.00 $4,539,080.43
43% 43% 43% 43% 43%
43,032,094.80 24,514,482.97 13,965,387.42 7,955,788.67 4,532,246.15
56,967,905.20 32,453,422.23 18,488,034.81 10,532,246.15 6,000,000.00

G BALANCE)

1 2 3 4 5
$40,000,000.00 $24,000,000.00 $14,400,000.00 $8,640,000.00 $5,184,000.00
0.4 0.4 0.4 0.4 0.4
1.Suppose a firm is considering the following project, where all of the dollar figures are in thousand
requires an $11,350 investment in plant and equipment, is depreciated using the straight-line meth
salvage value of $1,400 in year 7. The project is forecast to generate sales of 2,000 units in year 1, r
declining to 1,800 units in year 7, and dropping to zero in year 8. The inflation rate is forecast to be
year 5, and then leveling off. The real cost of capital is forecast to be 11.0% in year 1, rising to 12.2%
forecast to be a constant 35.0%. Sales revenue per unit is forecast to be $9.70 in year 1 and then gr
per unit is forecast to be $7.40 in year 1 and then grow with inflation. Cash fixed costs are forecast
grow with inflation. What is the project’s NPV?

NPV-BASICS
0 1 2 3 4
Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Inflation rates 2.0% 2.5% 3.0% 3.5%
Real cost of Capital 11.0% 11.2% 11.4% 11.6%
Tax Rate 35% 35% 35% 35%

Discounting
Nominal Discount rate =
Nominal Cost of Capital
Cumulative Discount Factor
Price or Cost/Unit
Sales Revenue/unit 9.70
Variable cost/unit 7.40
Cash Fixed Cost 5,280.00

Cashflow for Forecast

Sales
Variable cost
Gross Margin

Cash Fixed Cost

Depreciation
Total Fixed Cost

Operating Profit
Taxes
Net Profit
Add Back Depreciation
Operating Cashflow

Investment in Plant & (11,350.00)

Equipment
Cash Flow
Present Value of Each
Cashflow
Net Present Value
 ar figures are in thousands of dollars. In year 0, the project
sing the straight-line method over seven years, and has a
of 2,000 units in year 1, rising to 7,400 units in year 5,
tion rate is forecast to be 2.0% in year 1, rising to 4.0% in
% in year 1, rising to 12.2% in year 7. The tax rate is
9.70 in year 1 and then grow with inflation. Variable cost
h fixed costs are forecast to be $5,280 in year 1 and then

S
5 6 7
7,400.00 3,700.00 1,800.00
4.0% 4.0% 4.0%
11.8% 12.0% 12.2%
35% 35% 35%
1,400.00
2.Consider the same project as Project NPV - Basics. Let's examine the details of how you forecast t
Direct Labor, Materials, Selling Expenses, and Other Variable Costs are forecast to be $3.50, $2.00,
year 1 and then grow with inflation. Lease Payment, Property Taxes, Administration, Advertising, an
forecast to be $2,800, $580, $450, $930, and $520, respectively, in year 1 and then grow with inflati
Cost / Unit and the Total Cash Fixed Costs?

NPV-FORECASTING CASHFLOW
0 1 2 3 4
Basic Case Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Unit sales Scale Factor 100%
Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Inflation rates 2.0% 2.5% 3.0% 3.5%
Real cost of Capital increment 0.2% 0.4% 0.6%
Real cost of Capital 11.0%
Tax Rate 35% 35% 35% 35%

Discounting
Nominal Discount rate =
Nominal Cost of Capital
Cumulative Discount Factor
Price or Cost/Unit
Sales Revenue/unit 9.70

Variable cost/unit
Direct Labor 3.50
Materials 2.00
Selling Expenses 1.20
Other 0.70
Total Variable cost/unit

Cash Fixed Cost

Lease Payment 2,800.00
Property Taxes 580.00
Administration 450.00
Advertising 930.00
Other 520.00
Total Cash Fixed Cost
Cashflow for Forecast
Sales
Variable cost
Gross Margin

Cash Fixed Cost

Depreciation
Total Fixed Cost

Operating Profit
Taxes
Net Profit

Add Back Depreciation

Operating Cashflow

Investment in Plant & (11,350.00)

Equipment
Cash Flow
Present Value of Each
Cashflow
Net Present Value
 ls of how you forecast the project cash flows. Suppose that
ast to be $3.50, $2.00, $1.20, and $0.70, respectively, in
stration, Advertising, and Other cash fixed costs are
nd then grow with inflation. What is the Total Variable

ASHFLOW
5 6 7
7,400.00 3,700.00 1,800.00

7,400.00 3,700.00 1,800.00

4.0% 4.0% 4.0%
0.8% 1.0% 1.2%

35% 35% 35%

1,400.00
3.Consider the same project as above. Suppose we add that the project will require working capita
for every unit of next year's forecasted sales and this amount will grow with inflation going forwar

NPV-WORKING CAPITAL
0 1 2 3 4
Basic Case Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Unit sales Scale Factor 100%
Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Inflation rates 2.0% 2.5% 3.0% 3.5%
Real cost of Capital 11.0% 11.2% 11.4% 11.6%
Tax Rate 35% 35% 35% 35%

Discounting
Nominal Discount rate =
Nominal Cost of Capital
Cumulative Discount Factor
Price or Cost/Unit
Sales Revenue/unit 9.70

Variable cost/unit
Direct Labor 3.50
Materials 2.00
Selling Expenses 1.20
Other 0.70
Total Variable cost/unit

Cash Fixed Cost

Lease Payment 2,800.00
Property Taxes 580.00
Administration 450.00
Advertising 930.00
Other 520.00
Toatal Cash Fixed Cost

Working Capital
Working Capital/next year
0.87
Unit sales
Working Capital
Cashflow for Forecast
Sales
Variable cost
Gross Margin

Cash Fixed Cost

Depreciation
Total Fixed Cost

Operating Profit
Taxes
Net Profit

Add Back Depreciation

Operating Cashflow

Investment in Working - - - - -
Capital
Investment in Plant & (11,350.00)
Equipment
Investment Cashflow

Cash Flow
Present Value of Each
Cashflow
Net Present Value
ill require working capital in the amount of $0.87 in year 0
ith inflation going forward. What is the project NPV?

APITAL
5 6 7
7,400.00 3,700.00 1,800.00

7,400.00 3,700.00 1,800.00

4.0% 4.0% 4.0%
11.8% 12.0% 12.2%
35% 35% 35%
- - -

1,400.00
4.Consider the same project as above. Assume that the product life-cycle of seven years is viewed a
demand for the product is highly uncertain. Analyze the sensitivity of the project NPV to the unit sa
capital.

NPV-WORKING CAPITAL
0 1 2 3 4
Basic Case Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Unit sales Scale Factor 100%
Unit sales 2,000.00 4,000.00 5,600.00 6,800.00
Inflation rates 2.0% 2.5% 3.0% 3.5%
Real cost of Capital increment 0.2% 0.4% 0.6%
Real cost of Capital 11.0% 11.2% 11.4% 11.6%
Tax Rate 35% 35% 35% 35%

Discounting
Nominal Discount rate =
Nominal Cost of Capital
Cumulative Discount Factor
Price or Cost/Unit
Sales Revenue/unit 9.70

Variable cost/unit
Direct Labor 3.50
Materials 2.00
Selling Expenses 1.20
Other 0.70
Total Variable cost/unit

Cash Fixed Cost

Lease Payment 2,800.00
Property Taxes 580.00
Administration 450.00
Advertising 930.00
Other 520.00
Toatal Cash Fixed Cost

Working Capital
Working Capital/next year Unit
0.87
sales
Working Capital

Cashflow for Forecast

Sales
Variable cost
Gross Margin

Cash Fixed Cost

Depreciation
Total Fixed Cost

Operating Profit
Taxes
Net Profit

Add Back Depreciation

Operating Cashflow

- - - - -
Investment in Working Capital
Investment in Plant & (11,350.00)
Equipment
Investment Cashflow

Cash Flow
Present Value of Each Cashflow

Net Present Value -

Unit sales Scale Factor

80% 90% 100%
9%
Date 0 Real cost

11%
13%
of capital

15%
17%
 seven years is viewed as a safe bet, but that the scale of
oject NPV to the unit sales scale factor and to the cost of

PITAL
5 6 7
7,400.00 3,700.00 1,800.00

7,400.00 3,700.00 1,800.00

4.0% 4.0% 4.0%
0.8% 1.0% 1.2%
11.8% 12.0% 12.2%
35% 35% 35%
 - - -

1,400.00

es Scale Factor
110% 120%