Posts by: Fabien C
Two different NPV
I have tried to reconcile two methods to calculate the NPV of a project. In theory, both should normally lead to the same result. However I have obtain two different outcomes. I am looking at a project which is 100% debt finance. Loan principal repayment is made quarterly. At the end of the investm... Read More
I have tried to reconcile two methods to calculate the NPV of a project. In theory, both should normally lead to the same result. However I have obtain two different outcomes. I am looking at a project which is 100% debt finance. Loan principal repayment is made quarterly. At the end of the investm... Read More
Thanks for responding to my post. I get the theory but still not why I’ve got two different NPV. Let’s assume I finance a project 100% with equity which produces the following cash flows : -1000, -2000, +3500. I could alternatively put the money in the bank and get an interest rate of 3% per ann... Thanks for responding to my post. I get the theory but still not why I’ve got two different NPV. Let’s assume I finance a project 100% with equity which produces the following cash flows : -1000, -2000, +3500. I could alternatively put the money in the bank and get an interest rate of 3% per annum.
NPV1 : -1000 + -2000/(1+3%) + 3500/(1+3%)^2 = $357
NPV2: -1000 + – 2000 – 30 (interest foresaken for investing 1000 on Day 1)+ 3500 – 90.9 (interests foresaken for investing 1000 on Day 1 and 2000 the second year) = $379
So why 2 different numbers ? Read More