ILLUSTRATION:

The entity borrowed

P6,000,000 at 10% and agree to
make equal annual end-of-year
payments over 4 years.
Formula:
A = Pi
-n

1 (1+i)
Where:
A = payment each period
P = loan amount
i = interest rate
n = total numbers of payments
ILLUSTRATION: (even cash inflows)

Calculate the present value of a

project which requires initial investment of
P243,000 and it is expected to generate
cash inflow of P50,000 each month for 12
months. The target rate of return is 12%
per annum.
Formula:
-t

NPV = C x 1 ( 1 + r ) Initial investments

r
Where:
C = net cash inflow expected to be received in each period
r = required rate of return per period
t = number of periods
ILLUSTRATION: (uneven cash inflows)
An initial investment of P8,320 on plant and
machinery is expected to generate cash inflows of
P3,411 , P4,070 , P5,824 and P2,065 at the end of
first, second, third and fourth year respectively.
Calculate the Net Present Value of the investment
if the discount rate is 18%.
Formula:

NPV = C1 + C2 + C3 + . Initial
1 2 3 Investments

(1+R) (1+R) (1+R)

Where:
C = cash inflow
R = required rate of return
Assignment:
1. ABC Company borrowed P3,000,000 at 10% and agree to
make annual end-of-year payments over 4 years.

2. Project X requires an initial investments of P35,000 but

is expected to generate revenue of P10,000 , P27,000
and P19,000 for the first, second and third years,
respectively. The target rate of return is 12%.

3. Project Y also requires a P35,000 initial investment and

will generate P27,000 per year for 2 years. The target
rate remains 12%.