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    NPV Calculation

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    Rajesh1 Srinivasan
    The document contains information and calculations for two investment projects (A and B) including: 1) Project A has a net present value of $3,810 while Project B has a negative NPV of -$4,127. 2) Project A has an internal rate of return of 9.43% and Project B has an IRR of 6.39%. 3) Project B has an effective tax rate of 32.3% while Project A has a 0% tax rate since it is not taxed.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    NPV Calculation

    Uploaded by

    Rajesh1 Srinivasan
    34 views4 pages
    The document contains information and calculations for two investment projects (A and B) including: 1) Project A has a net present value of $3,810 while Project B has a negative NPV of -$4,127. 2) Project A has an internal rate of return of 9.43% and Project B has an IRR of 6.39%. 3) Project B has an effective tax rate of 32.3% while Project A has a 0% tax rate since it is not taxed.

    Original Description:

    NPV

    Original Title

    NPV calculation

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    © © All Rights Reserved

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    The document contains information and calculations for two investment projects (A and B) including: 1) Project A has a net present value of $3,810 while Project B has a negative NPV of -$4,127. 2) Project A has an internal rate of return of 9.43% and Project B has an IRR of 6.39%. 3) Project B has an effective tax rate of 32.3% while Project A has a 0% tax rate since it is not taxed.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    34 views4 pages

    NPV Calculation

    Uploaded by

    Rajesh1 Srinivasan
    The document contains information and calculations for two investment projects (A and B) including: 1) Project A has a net present value of $3,810 while Project B has a negative NPV of -$4,127. 2) Project A has an internal rate of return of 9.43% and Project B has an IRR of 6.39%. 3) Project B has an effective tax rate of 32.3% while Project A has a 0% tax rate since it is not taxed.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    Brealey Principles 12e

    Pr 6-2

    All input values are shown in yellow. Only these values need changed to review algo versions.
    Answers are displayed in red.
    Assumptions and other problem notes are displayed at the very bottom.

    Input variables:
    Payment in one year $100,000
    Nominal discount rate 8%
    Inflation rate 4%

    Solution and Explanation:


    Real cash flow $96,154
    Real discount rate 3.846%
    PV using real values $92,593

    Notes:
    algo versions.
    Brealey Principles 12e
    Pr 6-16

    All input values are shown in yellow. Only these values need changed to review algo versions.
    Answers are displayed in red.
    Assumptions and other problem notes are displayed at the very bottom.

    Input variables:
    Additional investment $100,000
    Cash inflow $26,000
    Cash inflow years 5
    Company A tax rate 0%
    Company B tax rate 35%
    Opportunity cost of capital 8%

    Year 1 Year 2 Year 3 Year 4


    MACRS rates 20.00% 32.00% 19.20% 11.52%

    Solution and Explanation:


    NPVA $3,810
    NPVB -$4,127

    Year: 0 1 2 3
    Aftertax cash flowsA -$100,000 $26,000 $26,000 $26,000
    IRRA 9.43%

    Aftertax cash flowsB: -$100,000 $23,900 $28,100 $23,620


    IRRB 6.39%

    Effective tax rate 32.3%

    Notes:
    go versions.

    Year 5 Year 6
    11.52% 5.76%

    4 5
    $26,000 $26,000

    $20,932 $20,932 $2,016

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