Net Present Value (NPV) - Assignment

Running Head: NET PRESENT VALUE 1
NET PRESENT VALUE
(Archer Daniels Midland Company)

NET PRESENT VALUE
Capital budgeting is a wide terms and it involves different techniques that are use d y
the companies, which helps them in making a decision regarding the acceptance or rejection of
the proposal. Net present value is the value that displays the difference between the cash inflows
and the cash outflows. Net present value is one of the most important techniques which are being
used by almost every next company while analyzing the selection of proposals. In the present
scenario, Archer Daniels Midland Company is seeking to purchase a new farm which involves
land, truck and other equipment (Damodaran, 2016).
Net Present value
Annual Cash
flows Rate of Return @10% Net Present value
0
$
12,000,000.00
$
1.00
$
(12,000,000.00)
1
$
1,800,000.00
$
0.91 $ 1,636,363.64
2
$
1,800,000.00
$
0.83 $ 1,487,603.31
3
$
1,800,000.00
$
0.75 $ 1,352,366.64
4
$
1,800,000.00
$
0.68 $ 1,229,424.22
5
$
1,800,000.00
$
0.62 $ 1,117,658.38
6
$
1,800,000.00
$
0.56 $ 1,016,053.07
7
$
1,800,000.00
$
0.51
$
923,684.61
8
$
1,800,000.00
$
0.47
$
839,713.28
9
$
1,800,000.00
$
0.42
$
763,375.71
10
$
1,800,000.00
$
0.39
$
693,977.92
Scrap Value
$
4,300,000.00
$
0.39 $ 1,657,836.14
Net Present Value
$
718,056.93