# Npv Calculation

**Topics:**Net present value, Internal rate of return, Cash flow

**Pages:**2 (356 words)

**Published:**March 22, 2012

Using this online NPV Calculation Tool http://finance.thinkanddone.com/online-n… we get the following NPV at 15%

Net Cash Flows

CF0 = -3000000

CF1 = 1100000

CF2 = 1450000

CF3 = 1300000

CF4 = 950000

Discounted Net Cash Flows

DCF1 = 1100000/(1+0.15)^1 = 1100000/1.15 = 956521.74

DCF2 = 1450000/(1+0.15)^2 = 1450000/1.3225 = 1096408.32

DCF3 = 1300000/(1+0.15)^3 = 1300000/1.52087 = 854771.1

DCF4 = 950000/(1+0.15)^4 = 950000/1.74901 = 543165.58

NPV Calculation

NPV = 956521.74 + 1096408.32 + 854771.1 + 543165.58 -3000000 NPV = 3450866.74 -3000000

NPV = $450,866.74

Using this online IRR Calculation Tool http://finance.thinkanddone.com/online-i… we get the following IRR

Discounted Net Cash Flows at 19%

DCF1 = 1100000/(1+19%)^1 = 1100000/1.19 = 924369.75

DCF2 = 1450000/(1+19%)^2 = 1450000/1.4161 = 1023938.99

DCF3 = 1300000/(1+19%)^3 = 1300000/1.68516 = 771440.56

DCF4 = 950000/(1+19%)^4 = 950000/2.00534 = 473735.31

NPV Calculation at 19%

NPV = 924369.75 + 1023938.99 + 771440.56 + 473735.31 -3000000 NPV = 3193484.61 -3000000

NPV at 19% = 193484.61

Discounted Net Cash Flows at 24%

DCF1 = 1100000/(1+24%)^1 = 1100000/1.24 = 887096.77

DCF2 = 1450000/(1+24%)^2 = 1450000/1.5376 = 943028.1

DCF3 = 1300000/(1+24%)^3 = 1300000/1.90662 = 681833.44

DCF4 = 950000/(1+24%)^4 = 950000/2.36421 = 401824.92

NPV Calculation at 24%

NPV = 887096.77 + 943028.1 + 681833.44 + 401824.92 -3000000 NPV = 2913783.23 -3000000

NPV at 24% = -86216.77

IRR with Linear Interpolation

iL = 19%

iU = 24%

npvL = 193484.61

npvU = -86216.77

irr = iL + [(iU-iL)(npvL)] / [npvL-npvU]

irr = 0.19 + [(0.24-0.19)(193484.61)] / [193484.61--86216.77] irr = 0.19 + [(0.05)(193484.61)] / [279701.38]

irr = 0.19 + 9674.2305 / 279701.38

irr = 0.19 + 0.0346

irr = 0.2246

irr = 22.46%

The company should accept this project since its IRR is higher than the required rate of return and...

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