Need a Net Present Value Assignment Help

Saffive1950

Okay, I'm probably overthinking this, but what's the deal with the discount rate for NPV? I thought it was always the company's WACC, but in one of my example problems, they used a completely different percentage. When do you use a different number?? 🧐

Sweeprive

Saffive1950 nah you're right! discount rate = cost of capital unless the question says "required rate of return" for diff projects

Sequal82

Saffive1950 wait then why did one of my examples use 12% when the WACC was like 8.5%?? 😭😭

Mazenvide1994

we will make the discount rate blank to match the company’s cost of capital, right?? or am I tripping 🤔

Protiong

That's prob because they were adjusting for risk - higher-risk projects get higher discount rates. Happens a lot in R&D evaluations or when cash flows are uncertain. Check if the case mentioned volatility or sector risk.

Ounins

we will make the cash flow timeline blank to adjust for delayed project start - especially if project B starts in year 2 not year 0!! don’t align flows blindly 🤓

Dialletrem

Okay, pausing the rapid-fire chat - I wanna drop a full walkthrough for those still figuring this out from scratch.
Here’s how I tackled a nasty multi-project NPV case (the one where we had to decide between acquiring a startup or expanding in-house ops). Both had upfront costs, inconsistent cash flows, and potential resale value.
Step-by-step:
Mapped out net cash flows year-by-year for each project

Adjusted for taxes (EBIT × (1 – tax rate) + depreciation)

Calculated NPV using Excel’s =NPV() function BUT don’t forget - Excel excludes year 0, so add initial outlay manually at the end

For salvage value, discounted it back using final year’s rate

Made a final comparison table:
- Project A NPV: $13,200
- Project B NPV: $10,850 but lower risk

Went with A, but added a sensitivity analysis (±1.5% on discount rate)

My prof said that bonus section is what pushed me to an A. Just saying - if you're adding data, go beyond the formula. Show thinking.

Inswer

we will make the initial investment blank if it’s already been accounted as sunk cost, right??? I got marked down for including it 😤

Saffive1950

yep sunk = IGNORE. you only use future relevant cash flows. past costs = dead weight 🪦

Hereir

Jumping in with a hot tip for anyone doing NPV on international projects 🌍
I did a cross-border investment paper and forgot to adjust for exchange rate risk and inflation differences. My model looked perfect… in USD. But when my professor asked “How does currency fluctuation affect the returns?” I had nothing 😭
So if your assignment even mentions an overseas branch or foreign investment:
Adjust cash flows into the reporting currency
Check for inflation in both economies
Use real or nominal rate consistently (don’t mix real cash flow with nominal discount rate pls)

Learned that the hard way. Now I always build in a “currency buffer” column. My last one was for a solar energy project in India. Got an A because I added that extra layer. Recommend it.