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    I need some help with my essay im doing.. here's what i've done:

    URL = http://img527.imageshack.us/my.php?image=npv3hm1.png

    [IMG][/IMG]

    Did I do it right?

    - Is NPV an annual thing? or is me doing it monthly correct? (because the 8 months is significant)
    - The NPV i stated at the end.. is that correct [the way i stated it]? (was obtained by 39575+(-30000)

    anything else wrong with it?
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    I can't seem to upload the pic.. hmm
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    Its uploaded fine - what was the original question?
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    Did I do it right?

    - Is NPV an annual thing? or is me doing it monthly correct? (because the 8 months is significant)
    - The NPV i stated at the end.. is that correct [the way i stated it]? (was obtained by 39575+(-30000)

    anything else wrong with it?
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    Yeah, the calculation seems to be right. Usually it's yearly, but there's nothing wrong with letting 1 month be the unit of time in this case.

    Yup, it looks fine. On paper it'd be like:

    NPV = - Inlay (initial at t=0 implies no discounting) + Outlay
    NPV = -C0 + A(V + V^2 + ... + V^n)
    NPV = -C0 + A[1/1+i + 1/(1+i)^2 + ... + 1/(1+i)^n]
    NPV = -30,000 + 6000(0.957 + 0.916 + ... + 0.703)

    Using 1/1+i = 0.967, I can deduce that interest rate i = 0.044932097

    [1/1+i + 1/(1+i)^2 + ... + 1/(1+i)^n] can actually be simplied to a term "a(n)", known as an" immediate annuity", made in arrear.

    Sorry for blabbering on! It's just I have a mid-term for financial maths tomorrow, so I'm trying to spit out anything vaguely relevant to your original question



    (Original post by G O D I V A)
    I need some help with my essay im doing.. here's what i've done:



    Did I do it right?

    - Is NPV an annual thing? or is me doing it monthly correct? (because the 8 months is significant)
    - The NPV i stated at the end.. is that correct [the way i stated it]? (was obtained by 39575+(-30000)

    anything else wrong with it?
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    I'd say it was unlikely that after 8 months the discount factor would be 0.7 unless the project is extremely risky. Currently the monthly interest rate is 4.5%. That equates to ((1.045)^12-1) = 70% annual interest, which seems pretty high. I can't be sure, as I don't have the question, but I'd say that they expect an annual rate of 4.5% which gives approximately 4.5%/12 = 0.0375% per month interest rate. Then use that to discount the monthly cash flows rather than 4.5%.
 
 
 
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