year 0 1 2 3

Cash flows -$400,000 $100,000 $200,000 $300,000

discounting rate 12%

NPV $62,259

Answer: Net present value is $62,259

t 0 1 2 3
CF (400,000) 100,000 200,000 300,000
r 12%
NPV= 62,258.56
 salary savings saving balance
1 40,000 2,000 2,000
2 42,000 2,100 4,260
3 44,100 2,205 6,806
4 46,305 2,315 9,666 E4*(1+$H$4)+D5
5 48,620 2,431 12,870
6 51,051 2,553 16,452
7 53,604 2,680 20,448
8 56,284 2,814 24,898
9 59,098 2,955 29,845
10 62,053 3,103 35,335
11 65,156 3,258 41,420
12 68,414 3,421 48,154
13 71,834 3,592 55,598
14 75,426 3,771 63,817
15 79,197 3,960 72,883
16 83,157 4,158 82,871
17 87,315 4,366 93,867
18 91,681 4,584 105,960
19 96,265 4,813 119,250
20 101,078 5,054 133,844
21 106,132 5,307 149,858
22 111,439 5,572 167,419
23 117,010 5,851 186,663
24 122,861 6,143 207,739
25 129,004 6,450 230,808
26 135,454 6,773 256,045
27 142,227 7,111 283,640
28 149,338 7,467 313,798
29 156,805 7,840 346,743
30 164,645 8,232 382,714 --> answer for a)

Year Salary Saving r NPV

31 40000 2000 8% ₫38,033.13
32 42000 2100
33 44100 2205
34 46305 2315.25
35 48620.25 2431.0125
36 51051.2625 2552.563125
37 53603.825625 2680.19128125
38 56284.01690625 2814.200845313
39 59098.21775156 2954.910887578
40 62053.12863914 3102.656431957
41 65155.7850711 3257.789253555
42 68413.57432465 3420.678716233
43 71834.25304089 3591.712652044
44 75425.96569293 3771.298284646
45 79197.26397758 3959.863198879
46 83157.12717645 4157.856358823
47 87314.98353528 4365.749176764
48 91680.73271204 4584.036635602
49 96264.76934764 4813.238467382
50 101078.007815 5053.900390751
51 106131.9082058 5306.595410289
52 111438.5036161 5571.925180803
53 117010.4287969 5850.521439843
54 122860.9502367 6143.047511836
55 129003.9977485 6450.199887427
56 135454.197636 6772.709881799
57 142226.9075178 7111.345375889
58 149338.2528937 7466.912644683
59 156805.1655383 7840.258276917
60 164645.4238153 8232.271190763
savings 5% 382,714 --> answer for point a
increase 5%
interest 8%

For question b), we use the annuity

PV 382,714
r 8%
t 20
C? 38,980 each year

C= ($38,980.30)

FV PMT
₫382,714.30 (₫38,980.30)
 cashflow accumulated cashflow
year A B A B
0 -40000 -55000 -40000 -55000
1 14000 11000 -26000 -44000
2 18000 13000 -8000 -31000
3 17000 16000 9000 -15000
4 11000 255000 20000 240000
NPV

A B
Payback period 2.47 3.06 If the company rule is very strict with t
IRR 19% 60% But, the decision to strict with payback
the expected NPV of project B is poten
Assume we have a discount rate of 12% then we can calculate the NPV
rate 12% 12%
NPV $5,940 $138,631
PI -$0.15 -$2.52
 cashflow
year A
0 -40000
1 14000
2 18000
3 17000
4 11000
IRR 19%
Assume with the discount rate =12%, Project B has higher NPV
IRR also higher for B

Discounted cash flows

-40000
12500
14349.4897959184
12100.264212828
6990.69886245314
5940.45287119949

company rule is very strict with the 3 years payback cut-off, project A should be accepted and project B should be rejected.
he decision to strict with payback cut-off may prevent the company for future value added. In this case, if we assume that both A and B ha
pected NPV of project B is potentially higher, and it can also be observed from its IRR.
 cashflow AC
B A B
-55000 -40000 -55000
11000 -26000 -44000
13000 -8000 -31000
16000 9000 -15000
255000 20000 240000
60%
nt rate =12%, Project B has higher NPV
2.470588235294 3.058823529412

ect B should be rejected.

case, if we assume that both A and B has the same rate,
 A B
0 -41300 -41300
1 19100 6300
2 17800 14200
3 15200 17900
4 8400 30300

IRR 20% 19%

 A B
0 -41300 -41300
1 19100 6300
2 17800 14200
3 15200 17900
4 8400 30300

IRR 20% 19%

a. in IRR rule, we pick one with higher IRR, so project A is chosen under IRR rule.
However, IRR rule is not enough since it needs a benchmark and cannot really reflect the time value of m

b.
rate 11% 11%
NPV $7,001.54 $8,948.59
Under NPV rule, the project chosen is B due to higher NPV.
lly reflect the time value of money.
13 sales growth from year 4-6 10%
cogs 70%
investment 5
depreciation 1

in million dollars
0 1 2 3
Sales 2.000 4.000 6.000
COGS 1.400 2.800 4.200
EBITDA 0.600 1.200 1.800
Depreciation 1.000 1.000 1.000
EBIT -0.400 0.200 0.800
tax -0.140 0.070 0.280
Net income -0.260 0.130 0.520
+depreciation 1.000 1.000 1.000
investment -5 0 0 0
net cashflow -5.000 0.740 1.130 1.520

NPV
 tax 35%
r 16%
mil salvage value 1
mil/year

4 5 6
6.600 7.260 7.986
4.620 5.082 5.590
1.980 2.178 2.396
1.000 1.000 0.000
0.980 1.178 2.396
0.343 0.412 0.839
0.637 0.766 1.557
1.000 1.000 0.000
0 0 0.650 MV-((MV-BV)*TAX) Salvage value phải có tax
1.637 1.766 2.207

0.102 million dollars

102,235 dollars
ge value phải có tax