Question

1. Find Q if the rate is 6% per year compounded yearly if outflows and inflows for a project over 5 years starting with Year 0 are as follows:
   1. Outflows: -$Q; -$18Q; -$25Q; $0; $0; $0
   2. Inflows: $0; $0; $0; $25,000; $85,000; $125,000

Answer 1

Assuming that the NPV will become 0 at 6% discount rate we can calculate the value of Q, for this we can use the goal seek function on excel:

Using it we get Q = 4517.05 and following schedule shows that NPV = 0

Year	CF	Discount Factor		Discounted CF
0	$        -4,517.05	1/(1+0.06)^0=	1	1*-4517.0520365773=	$         -4,517.05
1	$      -81,306.94	1/(1+0.06)^1=	0.943396226	0.943396226415094*-81306.9366583913=	$       -76,704.66
2	$ -1,12,926.30	1/(1+0.06)^2=	0.88999644	0.88999644001424*-112926.300914432=	$   -1,00,504.01
3	$        25,000.00	1/(1+0.06)^3=	0.839619283	0.839619283032302*25000=	$        20,990.48
4	$        85,000.00	1/(1+0.06)^4=	0.792093663	0.79209366323802*85000=	$        67,327.96
5	$    1,25,000.00	1/(1+0.06)^5=	0.747258173	0.747258172866057*125000=	$        93,407.27
				NPV = Sum of all Discounted CF	$                        -