Calculate NPV of perpetual cash flow using financial calculator

CFA Level I Quant
#1

Hi guys,

Is it possible to calculate NPV with a positive cash flow in perpetuity?

ie Cost , 15 mil, cash flow 1.8 mil in perpetuity, discount rate 10.5%

thanks

#2

Just calculate the PV of the perpetuity and subtract the initial cash flow.

1.8/0.105 - 15 = 2.142 million

#3

You can use the CF worksheet to get a reasonable approximation:

CF0=-15, C01=1.8, F01=999, 2nd quit, NPV worksheet, I=10.6, CPT NPV = 2.14286

#4

ah just set frequency to 999, nice! Good way to check