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TOPIC: Question rita's page 106

rita's page 106 4 years 7 months ago #3252

  • Nadia Momani
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hello
can anybody help me understanding how Rita solved the formula page 106 in her seventh addition book, i did not got the idea

rita's page 106 4 years 7 months ago #3254

  • Serge Lionel YEBEL NDIGUI
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hello, is it about how to calculate NPV at 10% rate of interest?

rita's page 106 4 years 7 months ago #3256

  • Nadia Momani
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yes,i couldn't understand the numbers in the table where did they come from
thank you

rita's page 106 4 years 7 months ago #3262

  • Serge Lionel YEBEL NDIGUI
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Hello,

The numbers in the table are just an example to show how to calculate NPV by applying the formula.

I think the most important is to keep in mind that:NPV is the TOTAL present value of your Revenues minus the TOTAL present value of your cost.over a given time period.

in the table you have the column for Income/Revenue, then you have another column for Costs.

so for this table,

NPV (from time period 0 to 3) = TOTAL (Present value of Income(year 0) +Present value of Income (year 1) +Present value of Income (year 2) +Present value of Income (year 3) ) - TOTAL ( Present value of COST (year 0) +Present value of COST (year 1) +Present value of COST (year 2) +Present value of COST (year 3) ).

Thanks

Serge
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