Net Present Value Calculation: A Questionnaire
Year
0
1
2
3
Flow
549
91
182
374
PV
549
91
182
374
NPV
98
d
0
When the discount rate is 0%, the future value is the same as the present value. Thus, the future values have not been discounted and this project has a positive NPV. If the discount rate is 5%, the output is:
Year
0
1
2
3
Flow
549
91
182
374
PV
549
86.66667
165.0794
323.0753
NPV
25.82129
d
0.05
The project still has a positive NPV, but this is much lower, with $25.82 million. This is because the value of some of those future cash flows is lower than it would be if there was no discounting.
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