Question

A company has been determined the they plan to invest $9,800,000 in a new solar field in November 2020. The investment will start paying off providing $200,000 per month starting in May 2021. For planning purposes, the project life would be to November 2030. What is the present value of this project at a required rate of return of 6% per year (Hint - use XNPV)?

Answer 1

Answer:

The Net Present Value of this project is:

$7,358,638.89

Explanation:

a) Data and Calculations:

Estimated cost of investment = $9,800,000 in November 2020

Monthly benefits = $200,000 starting from May 2021

Period of benefits = 9.5 years

Required rate of return = 6% p[er year

Using the Excel NPV (XNPV) function, the NPV = $7,358,638.886

b) The Present Value of the project is the discounted value of the cash inflows of $200,000 for 114 months and $9,800,000 on day 1.  An excel copy of the calculations is attached.

Download xlsx