present value of cash inflows and the present value of cash outflows

May 8th, 2015
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The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. Invest explains 'Net Present Value - NPV'

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Fin 511The initial investment Cost of new assets160,000net profit from sale of old assets(20,000)Net cash outflow 140,000Annual cash inflows Incremental cash inflow from revenuebalance250,000(200,000)incremental cash inflow from revenue50,000incremental savings in cash expensesBalance 140,000 (130,000)incremental saving in cash expenses10,000total cash flow60,000Annual depreciation YEARNEW ASSETA - DEP.OLD ASSETB - DEP.INCREMENTAL IN DEPRECIATION C=A-B1180,00045,00040,00010,00035,0002135,00033,75030,0007,50026,2503101,25025,312 22,5005,62519,687 475,937 18,984 16,8754,218 14,765 556,953 14,238 12,656 3,164 11,074 Statement of incremental cash flowsYears012345Net cash outflowinvestment140,000Cash-inflows60,00060,00060,00060,00060,000incremental increase in depreciation(35,000)(26,250)(19,687 )(14,765 )(11,074 )increase-in debit25,00033,75040,31245,23448,92530% TAXES(7,500)(10,125)(12,093 )(13,570 )(14,677 )Debit follow taxes17,50023,62528,21831,66434,248Add back incremental increase in depreciation35,00026,25019,68714,76511,074salvage value8,000Total incremental cash inflows52,50049,87547,90646,43053,322The n

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