Expected Cash Flows Essay - 275 Words

Expected Cash Flows (Essay Sample) Content: Studentà ¢Ã¢â€š ¬s Name:Instructorà ¢Ã¢â€š ¬s Name:Course Code Name:Date of Submission:Year Cashflow (A) Cashflow(B) PVF (11%) PV(A) PV(B) 0 ($600) ($625) 1 ($600) ($625) 1 ($400) $210 0.9009 ($360.36) $189.19 2 ($100) $190 0.8116 ($811.6) $154.20 3 $200 $180 0.7312 $146.24 $131.62 4 $900 $170 0.6587 $592.83 $111.98 5 $700 $220 0.5935 $415.45 $130.57 6 $999 $213 0.5346 $534.07 $113.87 7 ($111) $70 0.4817 ($53.47) $33.72 NPV ($136.84) $240.15 1. a. Present value when rate of return is 11%Year Cashflow (A) Cashflow(B) PVF (17%) PV(A) PV(B) 0 ($600) ($625) 1 ($600) ($625) 1 ($400) $210 0.8547 ($341.88) $179.49 2 ($100) $190 0.7305 ($73.05) $138.80 3 $200 $180 0.6244 $124.88 $112.39 4 $900 $170 0.5337 $480.33 $90.73 5 $700 $220 0.4561 $319.27 $100.34 6 $999 $213 0.3898 $389.41 $83.03 7 ($111) $70 0.3332 ($36.99) $23.32 NPV $261.97 $103.1 I will choose project B because it has positive and higher net present value of $240.15.1. b. Present value when rate of return is 17 %I will choose project A because it has higher net present value of $261.97Where: PVF= (1+i)-nPV= (PVF ÃÆ' Cashflow)NPV=à ¢PV2. Project IRRa. Project ANPV=Io - à ¢nt=1(Ct(1+IRR)n)Where: NPV=0Io=Initial investmentCt=Cashflown= number of yearsIRR= Internal rate of returnYear Cashflow (A) Cashflow(B) 1 ($400) $210 2 ($100) $190 3 $200 $180 4 $900 $170 5 $700 $220 6 $999 $213 7 ($111) $70 à ¢ $2188 $1253 a. Project A0= ($2188(1+IRR)7) - $600(1+IRR) 7=$2188$600(1+IRR)=7$2188$600(1+IRR)=1.203IRR=1.203-1IRR= 0.203 or 20.3%