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A firm is evaluating a project with an initial cost of $ 731,602 and annual cash inflows of $ 242,800 per year (first cash fl

8% If the returns on Stock A are as follows: Year 1 return = -1 %, Year 2 return = Year 3 return = -17 % , Year 4 return = 11
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Answer #1

rate positively ..

Ans 1 Computation of NPV
i ii iii=i*ii
Year Cash flow PVIF @ 12% Present value
0 -731602               1.0000       (731,602.00)
1 242800               0.8929         216,785.71
2 242800               0.7972         193,558.67
3 242800               0.7118         172,820.24
4 242800               0.6355         154,303.79
5 242800               0.5674         137,771.24
        143,637.66
NPV =       143,637.66
Ans 2 Computation of average return
year Return
1 -1%
2 8%
3 -17%
4 11%
5 26%
Total 27%
Average return = 27%/5 5.4%
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