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Duke Company: Calculations for the Project
Finance & Accounting
Pages 8 (2008 words)
Calculations for the Project Cash Flow Period Cash Flows NPV $35,366.48 Dec-09 556,000.00 Dec-10 128,000.00 Dec-11 440,000.00 Dec-12 550,000.00 NPV at 15% rate for a period of three years is $ 35, 366.48 Cost of Capital = Dividend per Share + Expected Future Earnings Market Price Share 313.38 + 0.16 21.56 14.72 = 15% Project Cost Flow Project cash flow PVIF@ 15% P.V Years 1 2 3 556000 128000 440000 0.8696 0.7561 0.6575 483497 96781 289300 Less initial capital 372000 +NPV 497578 IRR using 15% Years Cash flow PVIF@ 15% P.V 1 2 3 556000 128000 440000 0.8696 0.7561 0.6575 483497 96781 289300 869578 Using 10% Years Cash flow PVIF@ 15% P.V 1 2 3 556000 128000 440000 0.8696 0.7561 0.6575 505459.6 10
This means that our assets will be exposed to varied amounts of risk. Among them will be credit risk. There are assets which will not be fully paid for but will be still be under operations in the business. This means they will be exposed to credit risks. Of importance will be exposure of these assets to operational risks. The assets will still be used for operations in the business. This means there will be various operational risks to be encountered in the company. There will be market risks to be encountered. This would be reflected by the dangers of our assets being declared obsolete. The market is ever changing and the expectations of our customers are also changing (Clyde and Roman, 2007). This would be a challenge to be encountered. Depreciation will also be put into consideration as it will be a mandatory activity to counter all the above mentioned risks. Cost of assets. ...
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