Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $ (3,500,000.00) ($3,500,000.00) 1 $ 900,000.00 0.90909 $ 818,181.00 $818,181.82 2 $ 900,000.00 0.82645 $ 743,805.00 $743,801.65 3 $ 900,000.00 0.75131 $ 676,179.00 $676,183.32 4 $ 900,000.00 0.68301 $ 614,709.00 $614,712.11 5 $ 900,000.00 0.62092 $ 558,828.00 $558,829.19 Net Present Value $ (88,298.00) $ (88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. start with 5% increase for Year 1 net cash flow. Year Net Cash Flow 0 $ (3,500,000.00) 1 $ 2 $ 3 $ 4 $ 5 $
Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $ (3,500,000.00) ($3,500,000.00) 1 $ 900,000.00 0.90909 $ 818,181.00 $818,181.82 2 $ 900,000.00 0.82645 $ 743,805.00 $743,801.65 3 $ 900,000.00 0.75131 $ 676,179.00 $676,183.32 4 $ 900,000.00 0.68301 $ 614,709.00 $614,712.11 5 $ 900,000.00 0.62092 $ 558,828.00 $558,829.19 Net Present Value $ (88,298.00) $ (88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. start with 5% increase for Year 1 net cash flow. Year Net Cash Flow 0 $ (3,500,000.00) 1 $ 2 $ 3 $ 4 $ 5 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
| Year | Net |
Discount Factor | Present Value (using the factor) | Present Value (using Excel formula) | |||
| 0 | $ (3,500,000.00) | 1 | $ (3,500,000.00) | ($3,500,000.00) | |||
| 1 | $ 900,000.00 | 0.90909 | $ 818,181.00 | $818,181.82 | |||
| 2 | $ 900,000.00 | 0.82645 | $ 743,805.00 | $743,801.65 | |||
| 3 | $ 900,000.00 | 0.75131 | $ 676,179.00 | $676,183.32 | |||
| 4 | $ 900,000.00 | 0.68301 | $ 614,709.00 | $614,712.11 | |||
| 5 | $ 900,000.00 | 0.62092 | $ 558,828.00 | $558,829.19 | |||
| $ (88,298.00) | $ (88,291.91) | ||||||
| 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. start with 5% increase for Year 1 net cash flow. | |||||||
| Year | Net Cash Flow | ||||||
| 0 |
$ (3,500,000.00) |
||||||
| 1 | $ | ||||||
| 2 | $ | ||||||
| 3 | $ | ||||||
| 4 | $ | ||||||
| 5 | $ |
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