Discounted cash flow analysis takes into account the time value of money. The projected cash flow for Project X has been assessed and is given in the following table after allowance for taxation and depreciation (figures in parenthesis denote

 

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Discounted cash flow analysis takes into account the time value of money. The projected cash flow for Project X has been assessed and is given in the following table after allowance for taxation and depreciation (figures in parenthesis denote expenditure): Year 0 1 2 3 4 5 6 7 8 Project X (£200,000) £20,000 £20,000 £50,000 £50,000 £50,000 £50,000 £70,000 £70,000 Using a discount rate of 10 %, determine the payback time, cumulative present value, discounted net present value of the cash flow and return on investment for Project X. Comment on the viability of the project and risk associated with the project.

• Expert Answer

To calculate the payback time we need to determine the year in which the cumulative cash flow become View the full answer