Aiu Financial Management

Topics: Net present value, Cash flow, Finance Pages: 2 (379 words) Published: August 23, 2013
|Incremental Cash flow | |Year | |Year |Cash flows |Cumulative CF |Year/fraction |  | |1 |382875 |382875 |1 |  | |2 |579500 |962375 |1 |  | |3 |579500 |1541875 |1 |  | |4 |579500 |158125/579500 |0.27 |  | |5 |579500 |  |3.27 |years |

The payback period has been calculated by finding the cumulative cash flow by adding each year cash flow to arrive at the figure of initial investment of $1700000. Till year thee the amount is 1541875, which is short by 158125 which will be covered in the fourth year, but not complete year 4, therefore 158125 has been divided by the total cash flow of the year, which gives a fraction of 0.27, it means that total recovery period is 3.27 years.

|Net Present Value | |Year |Cash flows |PVIF |PV | |1 |382875 |0.9091 |348068 | |2 |579500 |0.8264 |478926 | |3 |579500 |0.7513 |435387 | |4 |579500 |0.6830 |395806 | |5 |579500 |0.6209 |359824 | |6 |474500 |0.5645 |267843 | |7 |474500 |0.5132 |243494 | |8 |674500 |0.4665 |314659 | |  |  |PV of inflows |2844007 | |  |  |less Outflow |-1700000...
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