OverviewA company’s growth and development, and indeed its ability to remain competitive and survive, depends upon a constant flow of new investment ideas. The most common and effective method used to

EBS160-O Entertainment Business Finance

Project 3 Answer Sheet: Net Present Value

1. Calculate the net present value for Project A.

The formula to calculate the present value of each year’s future cash inflow is:

Present Value = Future Value / (1 + rate)number of years

• The present value of cash inflow for year 1:

• The present value of cash inflow for year 2:

• The present value of cash inflow for year 3:

• The present value of cash inflow for year 4:

• The present value of cash inflow for year 5:

• The investment (cash outflow) at start of project:

• Project A’s net present value:

1. Calculate the net present value for Project B.

The formula to calculate the present value of each year’s future cash inflow is:

Present Value = Future Value / (1 + rate)number of years

• The present value of cash inflow for year 1:

• The present value of cash inflow for year 2:

• The present value of cash inflow for year 3:

• The present value of cash inflow for year 4:

• The present value of cash inflow for year 5:

• The investment (cash outflow) at start of project:

• Project B’s net present value:

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