Just wondering if anyone has derived an answer different from what is provided in the CFAI Text, Volume 3, page 37. I’m obtaining an NPV value of $166,662 instead of the answer the book provides, $213,907. The cash flows are constant at $102,000 for nine years and the terminal value of $150,000. The following are the incremental cash flows I have calculated using a discount of 8%: CF0=-540,000 CF1=94,444 CF2=87,449 CF3=80,971 CF4=74,973 CF5=69,419 CF6=64,277 CF7=59,516 CF8=55,107 CF9=51,025 CF10=69,479 The sum of these discounted cash flows is 166,662. Perhaps I am performing this calculation incorrectly. Has anyone else generated an NPV of 166,662?
Your CF10 is wrong. The $102,000 annuity goes for 10 years, not 9. Add it to the $150,000 in the final year.