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
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
Just calculate the PV of the perpetuity and subtract the initial cash flow.
1.8/0.105 - 15 = 2.142 million
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
ah just set frequency to 999, nice! Good way to check