# Essay on Finance Fo Business

1901 Words Dec 16th, 2012 8 Pages
Estimate the Net Present Value for the above project showing all necessary calculation. (Workings)
Approximately materials that are sold yearly is 2000 units, materials per unit cost £80.00
Therefore: £80.00 x 2000 = £160,000

Direct labour expenses £80.00 per unit
Accordingly: £80.00 x 2000 = £160,000

Allocated overheads are £100 per unit
Hence: £100.00 x 2000 = £200,000

Revenue is determined by the selling price expanded by 2000, which is the number of units sold
So 2000 x £400.00 = £800.00

Cash flow for each year
Year 0 - the initial outlay is the total cost for franchise, equipment and Monty Partners, which is: £300,000 + £150,000 + 100,000 = -£550,000

Year 1 - the expenses is the sum of Advertising, Fixed Costs,
It is also called the discounted cash flow rate of return. The term internal refers to the fact that its calculation does not incorporate environmental factors.
Year Cash flow Discount factor (15%) Discount Cash flow Discount Factor (25%) Discount Cash flow
0 -550,000 1 -550,000 1 -550,000
1 -100,000 1 / 1.15 = 0.869 = 0.87 87,000 1/1.25 = 0.8 -80,000
2 100,000 1 / 1.15^2 = 0.756 75,600 1/1.25^2 = 0.64 64,000
3 100,000 1 / 1.15^3 = 0.658 65,800 1/1.25^3 = 0.512 51,200
4 100,000 1 / 1.15^4 = 0.572 57,200 1/1.25^4 = 0.4096 40,960
5 100,000 1 / 1.15^5 = 0.497 49,700 1/1.25^5 = 0.32768 32,768
6 100,000 1 / 1.15^6 = 0.432 43,200 1/1.25^6 = 0.262144 26,214
7 100,000 1 / 1.15^7 = 0.376 37,600 1/1.25^7 = 0.2097152 20,971
8 100,000 1 / 1.15^8 = 0.327 32,700 1/1.25^8 = 0.16777216 16,777
9 100,000 1 / 1.15^9 = 0.284 28,400 1/1.25^9 =

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