Homework SourseP911 Calculating NPV LO1 For the following set of cash flows
P9-11 Calculating NPV [LO1] For the following set of cash flows, Year Cash Flow -$7,400 4,600 6,300 2 Required: (a) What is the NPV at a discount rate of 0 percent? (Click to select) (b) What is the NPV at a discount rate of 8 percent? (Click to select) (c) What is the NPV at a discount rate of 18 percent? (Click to select) (d) What is the NPV at a discount rate of 23 percent? (Click to select) ![P9-11 Calculating NPV [LO1] For the following set of cash flows, Year Cash Flow -$7,400 4,600 6,300 2 Required: (a) What is the NPV at a discount rate of 0 per](/WebImages/2/p911-calculating-npv-lo1-for-the-following-set-of-cash-flows-974430-1761497830-0.webp "P9-11 Calculating NPV [LO1] For the following set of cash flows, Year Cash Flow -$7,400 4,600 6,300 2 Required: (a) What is the NPV at a discount rate of 0 per")
Solution
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
a.Present value of inflows=6400+4600+6300=$17300
NPV=Present value of inflows-Present value of outflows
=(17300-7400)=$9900
b.Present value of inflows=6400/1.08+4600/1.08^2+6300/1.08^3
=$14870.83
NPV=$14870.83-7400=$7470.83
c.Present value of inflows=6400/1.18+4600/1.18^2+6300/1.18^3
=$12561.75
NPV =$12561.75-7400=$5161.75
d.Present value of inflows=6400/1.23+4600/1.23^2+6300/1.23^3
=$11629.29
NPV =$11629.29-7400=$4229.29
(Please note that intermediate calculations have not been rounded off].
