UK NPV With Profit Margin Consideration

[reidacus]

Hi All,

I've got a task of calculating a companies NVP while taking into consideration a profit margin. I have done NPV calculations before but never had to account for a profit margin.

The question is set out as thus :

A firm will invest £100,000 in Year 0
Calculate NPV at the end of Year 4, Using a Discount Rate of 10% and Profit Margin of 25%
Sales revenue each year are £176,848.
Do not attempt to account for tax.

Can anyone point me in the right direction of how to incorporate the profit margin into the calculation? Many thanks in advance for any guidance.

 

[Triest123]

Hi All,

I've got a task of calculating a companies NVP while taking into consideration a profit margin. I have done NPV calculations before but never had to account for a profit margin.

The question is set out as thus :

A firm will invest £100,000 in Year 0
Calculate NPV at the end of Year 4, Using a Discount Rate of 10% and Profit Margin of 25%
Sales revenue each year are £176,848.
Do not attempt to account for tax.

Can anyone point me in the right direction of how to incorporate the profit margin into the calculation? Many thanks in advance for any guidance.

=> with such limited information provided, you can view the profit as the "NET" cash inflow
annually from the investment.

 

[reidacus]

=> with such limited information provided, you can view the profit as the "NET" cash inflow
annually from the investment.

Sorry for the lack of information, its all i've actually been given. So are you saying that I should calculate the NVP for 75% for each of the yearly inflows?

 

[Triest123]

Sorry for the lack of information, its all i've actually been given. So are you saying that I should calculate the NVP for 75% for each of the yearly inflows?

=> annual net cash infow = 25% x sales revenue

 

[reidacus]

=> annual net cash infow = 25% x sales revenue

Smashing, thanks very much.