Equity Value

The Equity Value graph shows the value of the equity at different dates and for different discount rates.

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The equity values are calculated according to below formula, where R stands for the cashflows to equity (excluding the initial equity investment), and i stands for the discount rate, which is once the hurdle rate and once the effective equity IRR. Differences between the two results (depending on discount rate) represent the Net Present Value (green line in graph). Therefore, the NPV in the table describes the expected earnings in case the project is sold at the expected hurdle rate. A negative NPV arises when the effective equity IRR is below the hurdle rate, in which case the project delivers lower equity IRRs than is expected on the market. The opposite is true when the hurdle rate is below the effective equity IRR.

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