Examples Of *Net**Present*** Value** (NPV), ROI and
Payback Analysis
Introduction
Terms and Definitions

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Reserve of cash flow hedge will primarily be in relief to economic account in the following exercise.
The Group is exposed to consequential risks by the variation of the rates of change, that you/they can influence on its economic result and on the ** value** of the clean patrimony. Particularly:
Whereas the societies of the Group sustain costs denominated in different currencies by those of denomination of the respective proceeds, the variation of the rates of change can influence the Result operational...

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TecOne investors want a 40 percent rate of return on their investment, calculate the venture’s *present*** value**.
B. Now assume that the Year 6 cash flows are forecasted to be $900,000 in the stepping stone year and are expected to grow at an 8 percent compound annual rate thereafter. Assuming that the investors still want a 40 percent rate of return on their investment, calculate the venture’s

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time ** value** of money.
3) All projects can have only one

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b) PV = $31.28
Select option a
7. Project A and B have first costs of $10,000 and $18,000, respectively. Project A has ** net** annual benefits of $5,000 during each year of its 5 year useful life, after which it can be replaced identically.
Project B has annual benefits of $6600 during each year of its 10 year life. Use

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times attributed to the nature of a project.
Capital inv appraisal of new technologies: Problems, misconceptions and research directions
* Specifically, it has been alleged that the traditional appraisal methods of payback,
discounted *net**present*** value** (NPV) and internal rate of return (IRR) undervalues the long-term
benefits; that traditional financial appraisals assume a far too static view of future industrial
activity, under-rating the effects and pace of technological change; that there...

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000) (8,100)
Tax cost (2,730) (3,075) (4,590)
** Net** cash flow $6,020 $5,175 $10,710
Discount factor (6%) .943 .890

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decision-making process. The *net**present*** value** method is one of the useful methods that help financial managers to maximize shareholders’ wealth. The capital budgeting decision mergers Acquisitions

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hypothetical assumption that needed production facilities for the current line of powdered detergents were at 55 percent of capacity and expected to grow at a rate 20 percent a year and maximum production capacity was 100 percent? What would be the *present*** value** of this cash flow given the fact that the currently proposed new plant would involve cash outflows of $5 million in three years (assuming that acceptance of the Blast project would not affect the size of the proposed outlay, only the timing, and...

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_______________
1. What is the *net**present*** value** of a project with the following cash flows if the discount rate is 14 percent?
[pic]
A. -$3,140.43
B. -$929.90
C. $247.181
D. $1,027.67
E. $1,127.08
2. Timothy is considering an investment of $10,000. This investment is supposedly going to provide him with cash inflows of $2,500 in the first year and $6,000 a year for the following 2 years. At a discount rate of zero percent this investment has a

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(60,000)
1 18,000 19,000
2 15,000 17,000
3 18,000 19,000
4 16,000 14,000
5 19,000 15,000
6 14,000 13,000
Evaluate the above proposals according to:
1. Pay Back Period.
2. Accounting Rate of Return (ARR)
3. *Net**present*** value** method (NPV)
Proposal A is better than B, because ARR and NPV are higher than Proposal B
2. There are two Proposals. Proposal A and Proposal B. Proposal A costs $ 80,000 and Proposal B costs $ 100,000. The...

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A project's average ** net** income divided by its average book

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that inflow are reinvested at 80 percent of the internal rate of return
This is a correct answer
It is the difference in the reinvestment assumptions that can be significant in determining when to use the *present*** value** or internal rate of return methods.
Under the

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Essay.
*Net**Present*** value** is the difference between an investment’s market

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new vessel in *present*** value** terms? Compared to the book

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managers
Chapter 7— *Net**Present*** Value** and Other Investment
Question 1 : List the methods that a firm can use to evaluate a potential investment.
There are discounted and non-discounted cash-flow capital budgeting criteria to evaluate proposed investments. They are
1)

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$2) – (4,500 × $2)
= $1,000 U
4. Stiner Company’s total materials variance is
A) $2,000 U.
B) $2,000 F.
C) $2,100 U.
D) $2,100 F.
= $1,000 + $1,000
= $2,000 U
5. Which of the following will increase the *net**present*** value** of a project?
A) An increase in the initial investment.
B) A decrease in annual cash inflows.
C) An increase in the discount rate.
D) A decrease in the discount rate.
6. Which of the following is true?
A) The...

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Washington State University Finance 325
Practice Problems
1. What is the *net**present*** value** of a project with the following cash flows and a required return of 12 percent? Year 0 1 2 3 Cash Flow -$28,900 $12,450 $19,630 $ 2,750
2.
What is the

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making the project more favorable because the higher the project internal rate of return it’s more desirable because it makes the *net**present*** value** for all-cash flow projects equaling zero.
The business decision that George made what's important to him because he loves the business that he did wanted to grow the company and all me for the long term time

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*Net**present*** value**
In finance, the

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*Net**present*** Value**, Mergers and acquisitions
Abstract
Main objective of undertaking this to report was learn about NPV

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Economical assessment 4. Objectives assessment 5. Risk assessment 8. The is the difference between the total cost and the total income of a project over its lifetime. This includes both direct as well as indirect costs. 1. Payback 2. ** Net** profit 3.

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should build or not build the new generator.
The *Present*** Value** of the expected costs is $47.146 million dollars. Calculations are listed below:
Year Cost x PVIF (I, N) =

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1. Given the proposed financing plan, describe your approach (qualitatively) to ** value** AirThread. Should Ms. Zhang use WACC, APV or some combination thereof? Explain. (2 points)
* From the statement of AirThread case, we know that American Cable Communication want to raise capital by Leveraged Buyout (LBO) approach. This means ACC will finance money though equity and debt to buy AirThread and pay the debt by the cash flows or assets of AirThread.
* In another word, it’s a highly levered transaction...

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Master of Business Administration - MBA Semester 2
MB 0045 FINANCIAL MANAGEMENT
Name: Manybhushan Tiwary
Roll : 1205003226
Q1. What are the goals of financial management?
A1. The experts in the field of finance believe that if the market ** value** of the firm’s equity is maximized; the goal of the financial management is attained. There are two versions of the goals of the financial Management: Profit Maximization and Wealth maximization.
Profit maximization: This is a goal wherein, the returns...

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corporate finance.
3. Which of the following correctly completes the next sentence? The ** value** of any asset is the

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-------------------------------------------------
FINC5001 Capital Market and Corporate Finance
-------------------------------------------------
Workshop 5 – Capital Budgeting II
1. Basic Concepts Review
a) In applying *Net**Present*** Value**, what factors do we include, and what factors do we ignore?
Use cash flows not accounting income
Ignore
* sunk costs
* financing costs
Include
* opportunity costs
* side effects
* working capital
* taxation
* inflation
...

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Part I
A. *Present*** Value** with Discount rate of 7% = 15000/(1+7%) = 15000/1.07 = $14,018.69

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Week 5 – Homework Answers
P8-1. Suppose that a 30-year U.S. Treasury bond offers a 4% coupon rate, paid semiannually. The market price of the bond is $1,000, equal to its par ** value**.
a. What is the payback period for this bond?
b. With such a long payback period, is the bond a bad investment?
c. What is the discounted payback period for the bond assuming its 4% coupon rate is the required return? What general principle does this example illustrate regarding a project’s life, its discounted...

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*Net**Present*** Value**, IRR, and the Payback Period
Infomercial Entertainment, Inc.
In the good of days—before cable TV, fax machines, and multimedia personal computers—the
phrase,"…and now a word from our sponsor…”usually meant just that, Television commercials
were continued to thirty-and sixty—second messages, grouped together to occupy only two or
three minutes of viewing time. Occasionally, if you stayed up late enough sitting in front of the
tube, you'd see thirty minute segments on riveting topics...

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flow targets and maintain Stryker’s 20% growth benchmark.
To what extent have they been shaped by elements of corporate finance theory?
They are heavily influenced by corporate finance theory
All submissions are required to show the *net**present*** value** (NPV), internal rate of return (IRR) and payback period.
They need to highlight the project’s anticipated outgoing cash flow and earnings effects on the company and describe specific risks that could affect the projects abitily to deliver projects...

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expect an IPO valuation at 3.67 times revenues, producing gross proceeds of $764m with a *present*** value** of $116m (using our 60% discount rate). Assuming that Accessline meets this revenue target, and that no future funding is required, Apex will take a slight loss on its required rate of return, barring the voluntary distribution of the dividend from the board of directors, on which we are not offered a seat. The

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. To find the PVA, we use the equation:
PVA = C({1 – [1/(1 + r)]t } / r )
PVA = $60,000{[1 – (1/1.0825)9 ] / .0825}
PVA = $370,947.84
The *present*** value** of the revenue is greater than the cost, so your company can afford the equipment.
7. Here we need to find the FVA. The equation to find the FVA is:
FVA = C{[(1 + r)t – 1] / r}
FVA for 20 years = $3,000[(1.08520 – 1) / .085]
FVA for 20 years = $145,131.04
FVA for 40 years = $3,000[(1.08540 – 1) / .085]
FVA for 40...

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*Net**present*** value** is defined as the total

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Time ** Value** of Money
Exercise
1. If you invest $1000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in interim?
2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year, how much will you have at the end of the 20 years?
b. How much must you invest each year if you want to have $50000 at the end of the 20 years?
3. What is the

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Adjusted *Present*** Value**
Adjusted

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Internal Rate of Return (IRR) and *Net**Present*** Value** (NPV) are both powerful tools used in business to determine whether or not to invest in a particular project; both methods have its pros and cons. If given a choice I would choose NPV, because of the potential to anticipate profitability.
As it is assumed that the objective of a firm is to create as much shareholder wealth as possible for its owners through the efficient use of resources, the preferred method in determining whether or not to invest...

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the inputs into 1) the ** net** initial investment outlay at year 0, the initial investment $200,000 which include taxes and delivery, and the cost to install the equipment $12,500. The total

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The difference between the *present*** value** of cash inflows and the

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Time ** Value** of Money
We earn money to spend it and we save money to spend it in the future. However, for most people spending money in the

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Time ** Value** of Money
Resource: Ch. 12, 12-A, & 12-C of Health Care Finance
Part I: Complete the following table by inserting your responses to the questions. Cite any sources you use.
|Define the time

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** Value** Proposition
Your

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TIME ** VALUE** OF MONEY
The aim of this paper is to learn about time-

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above meaning of economic profit- Stern Stewart & Co. recognised that management’s goal should be to maximise the market ** value** of company but also that this could not be done in isolation from the capital invested in the company. Thus, management should aim to maximise the difference between the market

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to estimate the terminal ** value**.
Finally, regarding the valuation of non-operating investments in equity affiliates, due to limited data, market multiple approach would be better to use.
2 – Valuation of AirThread
Regarding the estimation of the long-term growth rate, Ms. Zhang knows that the long-term growth rate would be a function of the company’s return on capital (ROC) and reinvestment rate. According to the definition given in the case, ROC is defined as

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SLOVENSKA
USING OF THE ECONOMIC ** VALUE** ADDED MODEL FOR VALUATION OF A COMPANY
Doc. Ing. Eva Kislingerová, CSc. Prague University of Economics
Introduction
There is possibility to use, with respect to the object of valuation, several methods for valuation of a company in practice. One of the most important and highly used group of methods are yield methods. They are usually called Discounted Cash Flows (DCF) methods.

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overall ** value** of the firm, it should use debt to finance the $100 million purchase. Since interest payments are tax deductible, debt in the firm’s capital structure will decrease the firm’s taxable income, creating a tax shield that will increase the overall

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Hertz purchases the fleet from GM for $325,000, and Hertz is able to issue $200,000 of five year, 8% debt in order to finance the project. All principal will be repaid in one balloon payment at the end of the fifth year. What is the Adjusted *Present*** Value** (APV) of the project?
17.1 a. The maximum price that Hertz should be willing to pay for the fleet of cars with all-equity funding
is the price that makes the NPV of the transaction equal to zero.
NPV = -Purchase Price + PV[(1- TC...

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based on the study of “Customer ** Value** Marketing” starts with introduction section. We have mentioned the contents of the study in objectives of the report section.
The methodology section deals with the means of preparation of this report and the processes that we have followed.
Then the report describes the theoretical aspects of the study in the literature review. This section mainly consists of brief description about different important topics about customer

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GPI
I. Issue:
Should GPI ** present** an asset for prepaid pension costs in its U.S. financial statements for faithful representation of this situation?
II. GAAP List:
715-10-15-6: For purposes of preparing financial statements in accordance with U.S. GAAP, to the extent that those arrangements are in substance similar to pension or other postretirement benefit plans in the United States, they are subject to the provisions of this Topic, includes no special provisions applicable.
715-30-55-65:...

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Time ** Value** of Money
The time

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Time ** Value** of Money
Time

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Time ** Value** of Money Practice Problems − Solutions
Dr. Stanley D. Longhofer 1) Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest annually at the rate of 9 percent for seven years. a) How much will Jim have on deposit at the end of seven years? P/Y = 1, N = 7, I = 9, PV = 12,000, PMT = 0 ⇒ FV = $21,936.47 b) Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much would he have at the end of seven years? P/Y = 4, N = 7 × 4 = 28 ⇒ FV =...

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Customer Lifetime ** Value** (SMALL BOOK 167-177)
* Customer lifetime

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Time ** value** of money ("TVM") is defined as the idea that money available at the

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FIN2110 Finance Basics for Managers Fall 2011
Time ** Value** of Money Problems
Calculating Future

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CONCEPT OF *PRESENT*** VALUE** SO IMPORTANT FOR CORPORATE FINANCE?
The importance of concept of

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one of the most important concepts is the Time ** Value** of Money (TVM). Time

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year and reported the following information. The company had current assets of $153,413, ** net** fixed assets of $ 412,331, and other assets of $83,552. The firm also has current liabilities worth $65,314, long-term debt of $178,334, and common stock of $162,000. How much retained earnings does the firm have?
a. $ 405,648
b. $243,648
c. $167,918
d. $573,566
6.) Tre-Bien Bakeries generated

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In comparing two investment alternatives, the difference between the *net**present*** values** of the two alternatives obtained using the total cost approach will be the same as the

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