NPV calculation - HELP

UK Discussion in 'Exams and Studying' started by Alex1211, Dec 12, 2017.

  1. Alex1211

    Alex1211

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    Hi guys,

    Could you help me out as I am so terrible at math.

    Got a questions about starting new business in China and is asking to calculate NPV and provide views on financial viability and risks.

    Second bit should be easy but i cannot figure out the calculation. Please help.
    Investment - £1,000,000
    Year 1 - £1,500,000
    Year 2 - £1,750,000
    Year 3 - £2,200,000
    Year 4 - £2,650,000
    Year 5 - £2,900,000

    Anyone can help with the NPV calculation?

    Many thanks
     
    Last edited by a moderator: Dec 14, 2017
    Alex1211, Dec 12, 2017
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  2. Alex1211

    Drmdcpa VIP Member

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    Please note that if you are looking for assistance with an exam-style question, you must attempt the question yourself before asking for help. You can then state the answer you have so far and explain which aspect you need help with. Anyone posting exam-style questions expecting the answer to be given to them will have their posts removed. Repeat offenders will be banned from the forum.
     
    Drmdcpa, Dec 13, 2017
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  3. Alex1211

    Alex1211

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    I have attempted it of course!

    I used the only figure available for the calculation which is 40% desired return. That came to NPV of over £8million which is too much.

    I tried calculating discount rate by using IRR but that came to 166% so when using that figure for present value it also came to over £8mil....

    I have no other way of getting the discount rate. Hence my post.
     
    Alex1211, Dec 13, 2017
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  4. Alex1211

    Drmdcpa VIP Member

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    Your original post is not clear. If you provided your work, it might be clearer.

    To do NPV, you need cash inflows, cash outflows, the timing of those cash flows, and a discount rate. IRR is the discount rate needed to get NPV equal to zero.
     
    Drmdcpa, Dec 13, 2017
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