A lessor made an investment of ₱550,000 in equipment with an expected life of 5 years. He expects and incremental revenue of ₱460,000 while costs to be incurred are: Costs of sales₱120,000; Marketing, admin, and maintenance ₱150,000. Tax rate is 25%. Annual depreciation is ₱110,000. Cost of capital is 11%. The NPV would be? ₱ 87,203 ₱ 152,221 (₱ 23,334) ₱ 78,302 ₱ 63,712 ₱ 28,486

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.