Your financial adviser offers you the opportunity to invest in a financial project, Abekus. It requi
Question: Your financial adviser offers you the opportunity to invest in a financial project, Abekus. It requires you to put up an amount of £10,000 now. The estimated inflows and outflows of cash for the next six years of project Abekus are:
Year | Inflow | Outflow |
1 | £ 14,000 | £2,000 |
2 | £ 13,000 | £3,000 |
3 | £ 10,000 | £4,000 |
4 | £6,000 | £3,000 |
5 | £4,000 | £2,000 |
6 | £3,000 | £1,000 |
The interest rate is assumed to be i = 10% throughout the life of the project. Use the formula \(\frac{1}{{{\left( 1+i \right)}^{n}}}\) to find the discount factor
Using Excel, construct a table so that you can calculate the net present value of the investment. Copy the table into your report (your notes for lab 9 include an explanation of how to do this if you cannot do it already), and explain why it is important to know the NPV as well as the net income from the project. Explain how you get Excel to use the formula for the discount factor, and what value you use in the spreadsheet for the interest rate.
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