Question

For the following set of cash flows, Year Cash Flow 0 –$8,100 1 3,100 2 3,300 3 6,900 Required: (a) What is the NPV at a discount rate of 0 percent? (b) What is the NPV at a discount rate of 11 percent? (c) What is the NPV at a discount rate of 20 percent? (d) What is the NPV at a discount rate of 25 percent? rev: 09_18_2012 This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.Next Visit question mapQuestion 8 of 8 Total 8 of 8

Answer 1

a.Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$8,100. It is entered with a negative sign since it is a cash outflow.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 0%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 0% discount rate is $5,200.

b.Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$8,100. It is entered with a negative sign since it is a cash outflow.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 11%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 11% discount rate is $2,416.37.

c.Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$8,100. It is entered with a negative sign since it is a cash outflow.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 20%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 20% discount rate is $768.06.

d. Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$8,100. It is entered with a negative sign since it is a cash outflow.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 25%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 25% discount rate is $24.80.

In case of any query, kindly comment on the solution.