For the following set of cash flows, Year Cash Flow 0 –$7,500 1 3,500...

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For the following set of cash flows, Year Cash Flow 0 –$7,500 1 3,500...

For the following set of cash flows,

Year	Cash Flow
0	–$7,500
1	3,500
2	6,200
3.	3,700

d. What is the NPV at a discount rate of 24 percent?

business finance

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Answer 1

Answer #1

Year	Cash flow
0	-7500
1	3500
2	6200
3	3700

The cash flows are:

C0 = -7500, C1 = 3500, C2 = 6200, C3 = 3700

Discount rate = r = 24%

NPV is calculated using the formula:

NPV = C0 + C1/(1+r)1 + C2/(1+r)2 + C3/(1+r)3

NPV = -7500 + 3500/(1+24%)1 + 6200/(1+24%)2 + 3700/(1+24%)3 = -7500 + 2822.58064516129 + 4032.25806451613 + 1940.60286663758 = 1295.44157631499

NPV = $1295.44 (Rounded to two decimals)

Answer -> NPV = $1295.44

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Answer 2

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