00:04
To calculate the net present value, return on investment and payback period for project a, we will use the provided data and the discount rate of 10%.
00:15
Here npv formula is sigma ct divided by 1 plus r power t c.
00:32
Here ct represents the cash flows and here cu also comes.
00:41
And r is the discount rate, t is the time period and cu is the initial investment cost.
00:47
So we are going to put the formula, values in the formula.
00:51
So it will be 0 divided by 1 plus 0 .1 power 0 plus 2000 divided by 1 plus 0 .1 power 2 plus here 2000 divided by 1 plus 0 .1 power 3 plus 3000 divided by 1 plus 0 .1 power 4 plus 4000 divided by 1 plus 0 .1 power 5 minus 5000.
01:53
Calculating each component and summing them up, it will come 0 plus 1652 .89 plus 1504 .96 plus 2040 .72 plus 2754 .31 minus 5000.
02:19
So the answer is npv is dollar 1952 .88.
02:28
The npv of project a is approximately dollar 1952 .88.
02:37
Now we are going to calculate return on investment and the formula of return on investment is npv divided by co multiply by 100.
02:53
Now here we already calculate npv which is 1952 .88 divided by 5000 multiply by 100.
03:09
So roi will be 39 .06 percent...