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Calculation for NPV / VAN

Anonymous A asked on Aug 22, 2019 - 1 answer


could someone tell me, how they come up with the NPV/ VAN calculation here and there required price?


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updated his answer on Aug 24, 2019
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Hi Anonymous,

the link you posted seems not working, could you please post the full question? We can then provide an answer to it.





The new link works, thanks.

The solution is quite bad explained indeed.

For the NPV in the first case, you get -50M as follows:


  • Investment: 300M
  • Quantity: 500k
  • Price: 1850
  • Cost: 1800
  • Discount rate: 10%

Thus profit margin is 50. Multiplied times 500k you get 25M. Using the perpetuity formula with 10% discount rate, you get 250M in the lifetime of operations (25M/10%).

Thus the net result is -300M+250M = -50M

For the minimum price, you get 2025 as follows.


  • Investment: 300M
  • Old quantity: 300k
  • Old price: 2300
  • Old cost: 2000
  • New quantity: 500k
  • New price: x
  • New cost: 1800
  • Discount rate: 10%

For some reasons not clearly explained, the case assumes that you will produce the 300k at the old cost, plus the additional 500k at the new cost. Thus:

New profits – Investment = Old profits

((x-2000)*300k)/10% +((x-1800)*500k)/10%-300M=((2300-2000)*300k)/10%

Where x is the minimum price. Solving the equation you get



Hope this helps,


It should actually work, this is the case example on archery Thanks! — Anonymous on Aug 22, 2019 (edited)

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