Question
In: Finance
What is the NPV at a discount rate of zero percent?
|
A project has the following cash flows: |
| Year | Cash Flow | ||
| 0 | –$ | 15,400 | |
| 1 | 7,300 | ||
| 2 | 9,100 | ||
| 3 | 5,900 | ||
| a. | What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
| b. |
What is the NPV at a discount rate of 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| c. | What is the NPV at a discount rate of 20 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| d. | What is the NPV at a discount rate of 30 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Solutions
Expert Solution
a.
| Discount rate | 0.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (15,400.000) | 0 | (15,400.00) | (15,400.00) |
| 7,300.000 | 1 | 7,300.00 | (8,100.00) |
| 9,100.000 | 2 | 9,100.00 | 1,000.000 |
| 5,900.000 | 3 | 5,900.00 | 6,900.00 |
NPV = 6900
b.
| Discount rate | 10.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (15,400.000) | 0 | (15,400.00) | (15,400.00) |
| 7,300.000 | 1 | 6,636.36 | (8,763.64) |
| 9,100.000 | 2 | 7,520.66 | (1,242.975) |
| 5,900.000 | 3 | 4,432.76 | 3,189.78 |
NPV = 3189.78
c.
| Discount rate | 20.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (15,400.000) | 0 | (15,400.00) | (15,400.00) |
| 7,300.000 | 1 | 6,083.33 | (9,316.67) |
| 9,100.000 | 2 | 6,319.44 | (2,997.222) |
| 5,900.000 | 3 | 3,414.35 | 417.13 |
NPV = 417.13
d.
| Discount rate | 30.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (15,400.000) | 0 | (15,400.00) | (15,400.00) |
| 7,300.000 | 1 | 5,615.38 | (9,784.62) |
| 9,100.000 | 2 | 5,384.62 | (4,400.000) |
| 5,900.000 | 3 | 2,685.48 | (1,714.52) |
NPV = -1714.52
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