Question

Corporate finance questions, revision part 1 week 1-4, ZY . An amount of $121.000 is expected to be received one year from today at an interest rate (discount rate) of 10% per year. What is the present value of $121,000? smith invests in an project and he expects to receive $100,000 at the end of one year, at a discount rate of 25% per year, how much money at least he needs to invests now? 3. If the present value of $250 expected to be received one year from today is $200, what is the discount rate? 4. An initial investment of $500 produces a cash flow $550 one year from today. Calculate the rate of return on the project. 5. An initial investment of $400,000 will produce an end of year cash flow of $480,000. What is the NPV of the project at a discount rate of 20%?

Answer 1

1.
Present value=121000/1.1=110000

2.
Amount to be invested today=100000/1.25=80000

3.
Discount rate=250/200-1=25%

4.
Rate of return=550/500-1=10%

5.
NPV=-400000+480000/1.2=0