A company is considering investing in the following project. The company has to make an initial investment of 3 payments, each of £105,000. The first is due at the start of the project, the second 6 months later, and the third payment is due one year after the start of the project. After 15 years, it is assumed that a major refurbishment of the infrastructure will be required, costing £200,000. The project is expected to provide no income in the first year, an income received continuously of £20,000 in the second year, £23,000 in the third year, £26,000 in the fourth year and £29,000 in the fifth year. Thereafter, the income is expected to increase by 3% per annum (compound) at the start of each year. The income is expected to cease at the end of the 30th year from the start of the project. The cash flow within each year is assumed to be received at a constant rate. (i) Calculate the net present value of the project at a rate of interest of 8% p.a. effective. working in (000) according to me = pv of initial outlay= -105-105v^0.5-105v-200v^15 pv of income= 20 *v*[1-v^1/delta]+23*v^2 * [1-v^1/delta] +26 *v^3*[1-v^1/delta]+29 *v^4*[1-v^1/delta]+ 29*1.03*v^5 + 29*1.03^2 *v^6+.............+29*1.03^25*v^29 =20 *v*[1-v^1/delta]+23*v^2 * [1-v^1/delta] +26 *v^3*[1-v^1/delta]+ 29 *v^4*[1-v^1/delta]+ 29*v^5*1.03 [ 1+1.03v+......+1.03^24*v^24] = 20 *v*[1-v^1/delta]+23*v^2 * [1-v^1/delta] +26 *v^3*[1-v^1/delta]+ 29 *v^4*[1-v^1/delta]+ 29*v^5*1.03 annuity for 25 @ i' i' = (1.08)/1.03 -1 = 0.048543689 npv= -105-105v^0.5-105v-200v^15 +20 *v*[1-v^1/delta] + 23*v^2 * [1-v^1/delta] +26 *v^3*[1-v^1/delta] + 29 *v^4*[1-v^1/delta]+ 29*v^5*1.03 annuity for 25 @ i' i didnt get my ans. in solution ans is 4.30 . what is mistake in equation ?
