Category: Business and Money > Finance
Asked by: baseball2-ga
List Price: $5.00
25 Jul 2005 16:20 PDT
Expires: 24 Aug 2005 16:20 PDT
Question ID: 547812
What am I doing wrong? I am trying to figure NPV with an opportunity cost of capital at 12%. Project flows for year one is 28,500, year two is 22,500, year three is 16,500 and year four is a -500.00. I am using the following formula: 28,500/1.12 + 22,500/ (1.12)^2 + 16,500/ (1.12)^3 + -500/ (1.12)^ 4 My calculator is telling me syntax error. Can I not plug in a negative number? Sorry, I am really ignorant with this stuff. Any help would be greatly appreciated. Thanks.
Answered By: omnivorous-ga on 25 Jul 2005 16:28 PDT
Baseball2 -- My H-P (it's an old model) will take the negative numbers -- and indeed you should show outward cashflow for year 4 with these assumptions. Here are the NPV factors: Year 1: 1.1200 Year 2: 1.2544 Year 3: 1.4049 Year 4: 1.5735 So the year 4 cash flow, discounted is -500/1.5735 = -317.76 Let me know if there are any other problems in calculating this NPV. Best regards, Omnivorous-GA
rated this answer:
I get it now. Sorry for the confusion and thank you very much!
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