Homework Answers
| Project | |||||
| Discount rate | 0.12 | ||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow stream | -97000 | 7000 | 31000 | 41000 | 43000 |
| Discounting factor | 1 | 1.12 | 1.2544 | 1.404928 | 1.5735194 |
| Discounted cash flows project | -97000 | 6250 | 24713.01 | 29182.99 | 27327.277 |
| NPV = Sum of discounted cash flows | |||||
| NPV Project = | -9526.72 | ||||
| Where | |||||
| Discounting factor = | (1 + discount rate)^(Corresponding period in years) | ||||
| Discounted Cashflow= | Cash flow stream/discounting factor | ||||
| Reject project as NPV is negative | |||||
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