1
a
Inv | |||||||||||
Discount rate | 0.12 | ||||||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
Cash flow stream | -20000 | 1000 | 3000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 20000 |
Discounting factor | 1 | 1.12 | 1.2544 | 1.404928 | 1.5735194 | 1.762342 | 1.973823 | 2.210681 | 2.475963 | 2.773079 | 3.105848 |
Discounted cash flows project | -20000 | 892.8571 | 2391.582 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 6439.465 |
NPV = Sum of discounted cash flows | |||||||||||
NPV Inv = | -10276.096 | ||||||||||
Where | |||||||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | ||||||||||
Discounted Cashflow= | Cash flow stream/discounting factor | ||||||||||
Reject as NPV is negative
b
Inv | |||||||||||
Discount rate | 0.02 | ||||||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
Cash flow stream | -20000 | 1000 | 3000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 20000 |
Discounting factor | 1 | 1.02 | 1.0404 | 1.061208 | 1.0824322 | 1.104081 | 1.126162 | 1.148686 | 1.171659 | 1.195093 | 1.218994 |
Discounted cash flows project | -20000 | 980.3922 | 2883.506 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 16406.97 |
NPV = Sum of discounted cash flows | |||||||||||
NPV Inv = | 270.864 | ||||||||||
Where | |||||||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | ||||||||||
Discounted Cashflow= | Cash flow stream/discounting factor | ||||||||||
Accept as NPV is positive
Please ask remaining parts seperately, questions are unrelated |
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