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1) At 6
1) At 6.5% interest, how long does it take to double your money? To quadriple it?
2) A project costs $26,000, will be depreciated straight-line to zero over its 5 year life, and will require a net working capital investment of $1,000 up-front (which will be recovered at the end of project's life). The project has a required return of 12%. The project generates OCF of $13,000. What is the project's NPV?
Expert Solution
1) We can calculate the number of years by using the following formula in excel:-
=nper(rate,pmt,-pv,fv)
Here,
Nper = Number of years
Rate = 6.5%
Pmt = 0
PV = $100
FV = $100*2 = $200
Substituting the values in formula:
= nper(6.5%,0,-100,200)
= 11.01 years Or 11 years
We can calculate the number of years by using the following formula in excel:-
=nper(rate,pmt,-pv,fv)
Here,
Nper = Number of years
Rate = 6.5%
Pmt = 0
PV = $100
FV = $100*4 = $400
Substituting the values in formula:
= nper(6.5%,0,-100,400)
= 22.01 years Or 22 years
It will take 11 years to double the money.
It will take 22 years to quadriple the money.
2) NPV of the project = $20,430
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