FINANCE

Finance



Finance

Growth Enterprises:

Payback Method

Payback Period

Discounted Factor

10%

Year

0

1

2

3

Net Cashflow

(45,000.00)

20,000.00 15,000.00 12,000.00

Cumulative Cashflow

(45,000.00)

(25,000.00)

(10,000.00)

2,000.00

Discounted Cashflow

(45,000.00)

18181.82

12396.69

9015.78

payback period

2.166666667

Payback Period

Discounted Factor

35%

Year

0

1

2

3

Net Cashflow

(45,000.00)

20,000.00 15,000.00 12,000.00

Cumulative Cashflow

(45,000.00)

(25,000.00)

(10,000.00)

2,000.00

Discounted Cashflow

(45,000.00)

14814.81

8230.45

4877.31

payback period

2.166666667

Accounting Rate of Return defined as Average after-tax profits / Required Investment

Accounting Rate of Return (ARR)

=

Net Return

x 100

Capital cost

=

11,750.00

x 100

45,000.00

=

26.11 %

Internal Rate of Return (IRR)

Net Present Value with two different discount rates of 10% and 35%.

Discount rate

10%

Year

0

1

2

3

4

5

6

7

Net Cash flow

(4,000.00)

2,000.00 2,000.00 15,000.00 500.00 500.00 500.00 500.00

Discount Factor

1.1

1.21

1.331

1.4641

1.61051

1.771561

1.9487171

Discounted CF

-£ 4,000.00 ...