Exercise -4

Complete the following discounted cash flow table, plot the cumulative cash
flow graph, and P/I ratio. Assume that the first all capital expenses occurred
in the first two years, during which time there were no operating expenses or
revenue.
NET CUMMULATIVE DISCOUNTED CASH FLOW AT
CASH CASH FLOW
YEAR $MM $MM 5% 10% 20% 30%
1993 -450 -450 -450 -450 -450 -450
1994 -250 -700 -667 -645 605 -576
1995 -50 -750 -714 -682 -625 -577
1996 100 -650 -619 -591 -542 -500
1997 180 -470 -448 -427 -392 -362
1998 220 -250 -238 -227 -208 -192
1999 240 -10 -10 -9 -8 -8
2000 260 250 238 227 208 192
2001 250 500 476 455 417 385
2002 230 730 695 664 608 562
2003 220 950 905 864 792 731
2004 200 1150 1095 1045 958 885
2005 180 1330 1267 1209 1108 1023
2006 160 1490 1419 1355 1242 1146
2007 130 1620 1543 1473 1350 1246
2008 100 1720 1638 1564 1433 1323

2000
Cumulative cash flow graph
1500

1000

500

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-500

5% 10% 20% 30%

-1000
 NET 5% NET/(1+r)^n 10% 20% 30%
1993 -450 1 -450.00 1.00 -450.00 1.00 -450.00 1.00 -450.00
1994 -250 1.05 -238.10 1.10 -227.27 1.20 -208.33 1.30 -192.31
1995 -50 1.10 -45.35 1.21 -41.32 1.44 -34.72 1.69 -29.59
1996 100 1.16 86.38 1.33 75.13 1.73 57.87 2.20 45.52
1997 180 1.22 148.09 1.46 122.94 2.07 86.81 2.86 63.02
1998 220 1.28 172.38 1.61 136.60 2.49 88.41 3.71 59.25
1999 240 1.34 179.10 1.77 135.48 2.99 80.38 4.83 49.73
2000 260 1.41 184.78 1.95 133.42 3.58 72.56 6.27 41.44
2001 250 1.48 169.26 2.14 116.63 4.30 58.15 8.16 30.65
2002 230 1.55 148.26 2.36 97.54 5.16 44.58 10.60 21.69
2003 220 1.63 135.07 2.59 84.82 6.19 35.53 13.79 15.96
2004 200 1.71 116.94 2.85 70.10 7.43 26.92 17.92 11.16
2005 180 1.80 100.23 3.14 57.35 8.92 20.19 23.30 7.73
2006 160 1.89 84.85 3.45 46.35 10.70 14.95 30.29 5.28
2007 130 1.98 65.66 3.80 34.23 12.84 10.13 39.37 3.30
2008 100 2.08 48.10 4.18 23.94 15.41 6.49 51.19 1.95
TOTAL 1720 NPV 905.66 415.95 -90.08 -315.22