Print Lakehead’s NPV schedule year by year at 10 % — each year’s cash flow, its four-decimal single-sum factor and its present value — then the NPV and the decision. It lands 27 dollars below the annuity-shortcut answer; know why.
Print Lakehead’s NPV schedule year by year at 10 % — each year’s cash flow, its four-decimal single-sum factor and its present value — then the NPV and the decision. It lands 27 dollars below the annuity-shortcut answer; know why.
Answer
investment = 940_000 flows = {1: 270_000, 2: 270_000, 3: 270_000, 4: 270_000, 5: 360_000} rate = 0.10 total = 0 for t, cash in flows.items(): factor = round(1 / (1 + rate) ** t, 4) pv = round(cash * factor) total += pv print(f't={t} {cash:>10,} x {factor:.4f} = {pv:>12,}') npv = total - investment print(f'NPV = {npv:,} -> {"accept" if npv >= 0 else "reject"}')
Hermanson Vol 2 ch 26; Heisinger & Hoyle §8.2, §8.5