Determine the npv of a company, Finance Basics

Example of NPV Value

A company is faced along with the following five (5) investment opportunities as:

 

Cost

NPV

P.I = Total P.v___             Initial capital

P.I Ranking

1.

2.

3.

4.

5.

500,000

100,000

400,000

200,000

160,000

150,000

  40,000

  40,000

100,000

  90,000

1.3

1.4

1.1

1.5

1.6

4

3

5

2

1

This company has 750,000/= available to investment projects, three and four are equally exclusive.  All of the projects are divisible. Such group should be selected in order to maximize the NPV.  Specify this NPV figure.

Solution

By using PI to rank the projects in order of preference 5, 4, 2, 1, 3.

In order to maximize NPV, the following projects combination must be chosen as:

                                                                                             Shs.

Funds available for investment                                                 750,000

Cost of project:        5             160,000

                              4              200,000

                              2              100,000

                              1              290,000                                     (750,000)

                                                                                                 NIL

NPV = 90,000 + 100,000 + 40,000 + (290,000/500,000) * 150,000   = 317,000

Posted Date: 1/31/2013 1:19:56 AM | Location : United States







Related Discussions:- Determine the npv of a company, Assignment Help, Ask Question on Determine the npv of a company, Get Answer, Expert's Help, Determine the npv of a company Discussions

Write discussion on Determine the npv of a company
Your posts are moderated
Related Questions
Disadvantage of Joint Stock Companies Difficult to reconstruct the capital Many formalities in forming the company Heavy initial capital outlay. Loss of secrec


John has just inherited $50,000 from his Uncle Ted. John is currently studying his Bachelor of Accounting degree at CQUniversity part-time and has three (3) years of study remainin

if u were the professor wht your opinion about vincent mind stage

For this assignment you are acting as a financial analyst for Apple Inc. Apple Inc. Is one of the most innovative companies worldwide. For example, in November 2012 Apple sold 3 mi

Role of Venture Capital in Economic Development The categories of venture that capitalists might invest will include: a) Business start-ups - Whenever a business has been


Who is Floor Broker Floor brokers aren't many in number. They execute orders for fellow  members  and  receive  a  share  brokerage  commission  charged  by  a commission broke

From the following cost, production and sales data of Decors Motor Ltd., prepare comparative income statement for three years under (i) absorption costing method, and (ii) marginal

Your daughter is a beginning freshman in high school. By the time she enters her freshman year in college, you would like to have savings accumulated to pay her tuition for her nex