1. Assume you have the following cashflows Time: 0 1 2. 3 4 5 Cf: 21...

1. Assume you have the following cashflows

Time: 0 1 2. 3 4 5

Cf: 21 4 5 6. 6(1 + .02). 6(1+.02)^2

After year 3 cashflows will grow by constant 2% rate

What is the discounted present value of these cashflows if your project's cost of capital is 13%?

Solutions

Expert Solution

Net Present value has to be calculated using NPV function in EXCEL

=NPV(rate,Year1 to Year5 cashflows)-Year0 cashflow

=NPV(13%,Year1 to Year5 cashflows)-21=-$2.24

cost of capital	13%

Year0	-21
Year1	4
Year2	5
Year3	6
Year4	6.12
Year5	6.24

NPV	-2.24

jeff jeffy answered 2 years ago

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