Answer :
a) NPV at a discount rate of 0%.
Year | Cash Flow($) | Discount Factor at 0% (Note 1) | Discounted Cash Inflow($) |
0 | -16,400 | 1.0000 | -16,400 |
1 | 7,100 | 1.0000 | 7,100 |
2 | 8,400 | 1.0000 | 8,400 |
3 | 6,900 | 1.0000 | 6,900 |
Net Present Value | 6,000 |
b) NPV at a discount rate of 10%.
Year | Cash Flow($) | Discount Factor at 10% | Discounted Cash Inflow($) |
0 | -16,400 | 1 | -16,400 |
1 | 7,100 | 0.9091 | 6,455 |
2 | 8,400 | 0.8264 | 6,942 |
3 | 6,900 | 0.7513 | 5,184 |
Net Present Value | 2,181 |
c) NPV at a discount rate of 20%.
Year | Cash Flow($) | Discount Factor at 20% | Discounted Cash Inflow($) |
0 | -16,400 | 1 | -16,400 |
1 | 7,100 | 0.8333 | 5,916 |
2 | 8,400 | 0.6944 | 5,833 |
3 | 6,900 | 0.5787 | 3,993 |
Net Present Value | -658 |
d) NPV at a discount rate of 30%.
Year | Cash Flow($) | Discount Factor at 30% | Discounted Cash Inflow($) |
0 | -16,400 | 1 | -16,400 |
1 | 7,100 | 0.7692 | 5,461 |
2 | 8,400 | 0.5917 | 4,970 |
3 | 6,900 | 0.4552 | 3,141 |
Net Present Value | -2,828 |
Note 1 : At a discount rate '0' future generations of income treating as like current income.
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