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A company is evaluating an investment with an initial outlay of 200 000 SEK. The economic...

A company is evaluating an investment with an initial outlay of 200 000 SEK. The economic life of the investment is 5 years and the scrapping value after 5 years is expected to be zero. The investment is expected to generate a yearly cash-surplus of 80 000 SEK per year during year 1 to 5. The cost of capital for this investment type will be 10%.
(a) The investment project Net Present Value is? (in thousands SEK)
(b) The investment project Future Value is? (in thousands SEK)
(c) The investment project Internal Rate of Return is? (in full percentages)

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Answer #1

You start with initial outflow of -200,000 SEK. Each year you get 80,000SEK and no value at the end.

Use NPV formula in excel using rate of 10% and the cashflows to arrive at 93,875 SEK.

Use IRR formula in excel to arrive at 29%

Use Future value (FV) formula in excel using 10% rate, 5 year period, PMT or annuity of 80,0000 and PV of -200,000.

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