Calculating NPV.formula is difficult!
I need help with the spreadsheet below. I need to use present value analysis to discount the cash flows and also need to determine if the project is a net positive or negative impact on the firm, NPV. Calculate the certainty equivalent cash flows and NPV.
I am not quite sure how to calculate this, the equation is very confusing... my next class is Thursday night but the assignment is due Friday--any help would be appreciated.
Spreadsheet:
Year 2005 2006 2007 2008 2009 2009
T = 0 1 2 3 4 5
Risk Free 2.25% 2.50% 2.75% 3.00% 3.25% 3.25%
Rate
Cost of Capital 6.00% 7.00% 8.00% 9.00% 10.00% 11.00%
(US$ millions, incremental)
Net Sales 30 35 40 45 50
Selling, General (20) (18) (15) (12) (12)
& Admin.
Depreciation (10) (10) (10) (10) (10)
Interest Expense (2) (2) (2) (2) (2)
Income Before Taxes (2) 5 13 21 26
Income Taxes 1 (2) (5) (8) (10)
Net Income (1) 3 8 13 16
Capital Investment (50)
Addback Noncash 10 10 10 10 10
Cash Flow (50) 8.76 13.10 18.06 23.02 26.12
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