NPV calculations for capital works project req for investment appraisal - URGENT!

[robinc]

Urgently need some help on this, any would be greatly appreciated

I am supporting a charity with a grant application for a capital works project and they need an investment appraisal including NPVs for base case and preferred option as part of the application.

The investment total is £640,641 with a third from the grant funder, rest from the charity.

The discounted rate is 3.5%

Period of 'investment' (remembering its a grant so no payback required) is based over 2 financial years.

The project involves the 'gifting' of space from the landlord into current lease (122 year on that) - confirmed current lease value £70,000 rising to £210,000 once works complete but no disposals so no income gained.

The project will support increased delivery of services, funded through other government/ charitable contracts, which do have a value and these 'outputs' are included in the application i.e. benefits to the community, employers, etc and profiled over 3 years.

All I can find on the net ios NPV calculators and info relating to cash returns on an investment and having trouble relating it to this project as there are no direct returns, i.e. cash flows in........unless the revenue from service delivery is that?

PLEASE HELP............application needs to be completed for 3pm today!

 

[Ishuda]

Urgently need some help on this, any would be greatly appreciated

I am supporting a charity with a grant application for a capital works project and they need an investment appraisal including NPVs for base case and preferred option as part of the application.

The investment total is £640,641 with a third from the grant funder, rest from the charity.

The discounted rate is 3.5%

Period of 'investment' (remembering its a grant so no payback required) is based over 2 financial years.

The project involves the 'gifting' of space from the landlord into current lease (122 year on that) - confirmed current lease value £70,000 rising to £210,000 once works complete but no disposals so no income gained.

The project will support increased delivery of services, funded through other government/ charitable contracts, which do have a value and these 'outputs' are included in the application i.e. benefits to the community, employers, etc and profiled over 3 years.

All I can find on the net ios NPV calculators and info relating to cash returns on an investment and having trouble relating it to this project as there are no direct returns, i.e. cash flows in........unless the revenue from service delivery is that?

PLEASE HELP............application needs to be completed for 3pm today!

Assuming I am understanding you correctly, that the work in completed in 2 years and the £70K for the lease is 'paid' (granted) now for the lease for the present financial year and 'paid' again in one year for the second financial year, the present value of that part of the grant (PV1) is
PV1 = £70000 [ 1 + 1/1.035 ]
Now, at the beginning of the third year there is an increase in the grant value to £210K per year and the future present value FPV at the beginning of that time is
FPV = £210000 [ 1 + 1/1.035 + 1/1.035² + 1/1.035³ + ... + 1/1.035^n-1]
where n is the addition number of years [and that assumes the lease value doesn't change], that is the n = m - 2 where m is the total number of years the grant runs. To bring the FPV back to the present time for PV2 we have
PV2 = FPV / 1.035²

NPV is the sum of PV1 and PV2.