|
Year |
CashFlow in $ |
Discount rate(10%) |
|
Excel Formula |
|
0 |
5000000 |
5000000.0 |
cashflow/(1+discount rate)^year |
B2/((1+(10/100))^A2) |
|
1 |
570000 |
518181.8 |
|
|
|
2 |
570000 |
471074.4 |
|
|
|
3 |
570000 |
428249.4 |
|
|
|
4 |
570000 |
389317.7 |
|
|
|
5 |
570000 |
353925.2 |
|
|
|
6 |
570000 |
321750.1 |
|
|
|
7 |
570000 |
292500.1 |
|
|
|
8 |
570000 |
265909.2 |
|
|
|
9 |
570000 |
241735.6 |
|
|
|
10 |
570000 |
219759.7 |
|
|
|
11 |
570000 |
199781.5 |
|
|
|
12 |
570000 |
181619.6 |
|
|
|
13 |
570000 |
165108.7 |
|
|
|
14 |
570000 |
150098.8 |
|
|
|
15 |
570000 |
136453.5 |
|
|
|
16 |
570000 |
124048.6 |
|
|
|
17 |
570000 |
112771.5 |
|
|
|
18 |
570000 |
102519.5 |
|
|
|
19 |
570000 |
93199.6 |
|
|
|
20 |
570000 |
84726.9 |
|
|
|
Net Present Value |
9852731.3 |
(SUM OF DISCOUNTED CASHFLOWS) |
SUM(C2:C22) |
|
|
|
|
|
|
We can use 20 year bond rate(10%) as the discount rate as it is
matching with the tenure of the project and it is also the current
rate for a 20 year bond. Net Present Value is calculated using the
present interest rate not based on what it would be in future. As
expected Net Present Value is negative, Micron shouldn't
accept this project.
