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
give an introduction about stock exchage in india,,includig BSE


Review the budget below and answer the questions following the budget. FINANCIAL ACCOUNTING—STATEMENT OF REVENUE AND EXPENSES Statement of Revenue and Expenses for Group Practice f

Opportunity Cost or Residual Loss It is the cost due to the failure of both parties to act optimally like as in example of A. Lost opportunities because of incapability to

Marbela Corporation's stock had a required return of 12.75% last year, when the risk-free rate was 6.4% and the market risk premium was 5.5%.  Now suppose the market risk premium d

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

SCENARIO You have just moved out of home and have a part-time job that pays you $18 per hour after tax (you work 20 hours a week). You also have $5000 in a savings account. You

Role of Stock Exchange in Economic Development The Roles of Stock Exchange in Economic Development are as follow: 1. Raising Capital for Businesses The Stock Exchange

MM Dividend Irrelevance Theory Such was advanced via Modigliani and Miller in 1961.  The theory asserts to a firm's dividend policy has no effect on cost of capital and on its

Relationships and interactions among money, bond, stock and mortgage markets