For the following set of cash flows, |
Year | Cash Flow |
0 | –$9,000 |
1 | 6,100 |
2 | 6,500 |
3 | 5,000 |
a. What is the NPV at a discount rate of 0 percent? |
b. What is the NPV at a discount rate of 9 percent? |
c. What is the NPV at a discount rate of 25 percent? |
d. What is the NPV at a discount rate of 30 percent? |
a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=6100+6500+5000
=17600
NPV=Present value of inflows-Present value of outflows
=17600-$9000
=8600
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=6100/1.09+6500/1.09^2+5000/1.09^3
=14928.17
NPV=Present value of inflows-Present value of outflows
=14928.17-$9000
=5928.17(Approx).
c.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=6100/1.25+6500/1.25^2+5000/1.25^3
=11600
NPV=Present value of inflows-Present value of outflows
=11600-$9000
=2600
d.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=6100/1.3+6500/1.3^2+5000/1.3^3
=10814.29
NPV=Present value of inflows-Present value of outflows
=10814.29-$9000
=$1814.29(Approx).
For the following set of cash flows, Year Cash Flow 0 –$9,000 1 6,100...
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