Question: why does NPV need to plus the PV of DTS? Components of the NPV: - CF0=$1M - DTS1..DTS8=30%$1M/8 years =$37,500pa This is an ordinary annuity

why does NPV need to plus the PV of DTS?

Components of the NPV: - CF0=$1M - DTS1..DTS8=30%$1M/8 years =$37,500pa This is an ordinary annuity so PV=$200,059.73 - Income in perpetuity, after tax =(130%) EBIT Then perpetuity has value PMT/R=7.0EBIT Now solve $1M+200059.73+7EBIT=0 and find we need >$114,277.18 EBIT for positive NPV

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