Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

Sporting contract, net present value, payback

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• Year PV discount factor Cash outflows PV of cash

13.17 Sporting contract, net present value, payback. (30 min) 1a Summary of cash inflows and outflows (in millions) is as follows Cash outflows Cash inflows Net cash inflows Year 1 (start) NKr 3.000 NKr 0 NKr (3.000) Year 1 (end) 5.500 5.600 0.100 Year 2 (end) 6.200 8.300 2.100 Year 3 (end) 7.300 9.100 1.800 Year 4 (end) 7.900 9.700 1.800 Year PV discount factor Cash outflows PV of cash outflows Cash inflows PV of cash inflows 0: Year 1 (start) 1: Year 1 (end) 2: Year 2 (end) 3: Year 3 (end) 4: Year 4 (end) 1.000 0.893 0.797 0.712 0.636 NKr 3.000 5.500 6.200 7.300 7.900 NKr 3.0000 4.9115 4.9414 5.1976 5.0244 NKr23.0749 NKr 0 5.600 8.300 9.100 9.700 NKr 0 5.0008 6.6151 6.4792 6.1692 NKr24.2643 The net present value of the Monteiro contract is NKr1.1894 (NKr24.2643 − NKr23.0749) million. An alternative approach to determine the NPV of the Monteiro contract is as follows Download 1.72 Mb. Share with your friends: