Consider the following values for PV of All Benefits, PV of All Costs, and Yearl

Question

Consider the following values for PV of All Benefits, PV of All Costs, and Yearly NPV for year 1-5 of an economic feasibility analysis worksheet, as indicated below:

1- Indicate the value for the Cumulative NPV for year 2?

2- Indicate the value for the Cumulative NPV for year 3?

3-- Indicate the value for the Cumulative NPV for year 4?

4- Indicate the value for the Cumulative NPV for year 5?

5- Indicate the return on investment for this project (percentage)?

6- Describe when will the break-down occur and why?

Yea 1 Year 2 Year 3 Year 4 Year 5 PV of All Benefits 1226 2432 3619 4789 5942 PV of All Costs 3274 4012 4718 5383 6011 Yearly NPV 2047 467 482 504 526 Commulitive NPV ? ? ? ? ?

Explanation / Answer

1- Cumulative NPV for year 2 = 2047+467 = 2514

2- Cumulative NPV for year 3 = 2514+482 = 2996

3- Cumulative NPV for year 4 = 2996+504 = 3500

4- Cumulative NPV for year 5 = 3500+526 = 4026

5- Return on investment = Sum of Yearly NPVs / Sum of PV of Costs = 4026 / (3274+4012+4718+5383+6011) = 17.2 %

Year 1 Year 2 Year 3 Year 4 Year 5 PV of All Benefits 1226 2432 3619 4789 5942 PV of All Costs 3274 4012 4718 5383 6011 Yearly NPV 2047 467 482 504 526 Commulative NPV 2047 2514 2996 3500 4026

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