Here is the sample on Calculating NPC. Can you please provide me a formula that can help me with this sample and why it is used? Your help is appreciated Theresa Potter

Calculating NPV

Year Project A Project B

0 - $12,700 - $9.400

1 $ 7.000 - $ 4,500

2 $ 5,500 $ 3,750

3 $ 2,500 $ 3.400

_________ _________

NPC $12.234.62 $ 9.540.96

Rank 2 $4,65.36

Rank 1 $140.96

At a 13 % discount rate project B should be chosen as it yields a positive payback figure after 3 months whereas project A does not.

Calculations NPV: Note: Not sure if this is the right formula? Please let me know.

Discounted Rate

NPV= E (After - Tax Cash Flow/ (1+r)^t)- initial investment

The NPV and IRR and the discount rate are all connected. The amount of the timing cash flows and the weighted cost of capital. In solving the NPV used r with an IRR. Solve for the NPV using the as a percentage return. Discount rate can set the IRR to be zeroed out. The rate that is discounted is equal to IRR. This is when the NPV will become zero. If the capital cost is equal to the capital return that it will show it as breaking even.