Question

Consider the following cash flows (see the attached Excel sheet) and answer the following questions.(see attached pic) a) What is the net present value (NPV) if the opportunity cost of cost of capital is 10%? b) Add an outflow of $2000 at time 0 and lower the opportunity cost of capital to 6%. Now, what is the net present value?

M N O 1 Parta) 2 Year Cash Flow 0 $ 2,000 1 $ 2,000 2 $ 3 $ 1,500 4 $ 2,500 5 $ 4,000 10 Cost of Capital 11 NPV 12 14 Part B) 15 Add an outflow of $2000 at time 0. 16 17 Year Cash Flow 0 $ (2,000) 1 $ 2,000 2 $ 3 $ 1,500 4 $ 2,500 5 $ 4,000 25 Cost of Capital 26 NPV 29 30 Consider the following cash flows (see the attached Excel sheet) and answer the following questions. 31 Show your work in Excel. 32 a) What is the net present value (NPV) if the opportunity cost of cost of capital is 10%? 33 b) Add an outflow of $2000 at time 0 and lower the opportunity cost of capital to 6%. Now, what is the net present value? 35

Answer 1

Part a) Calculation of NPV Amount in $

Year	Cashflow	PV factor @ 10%	PV of Cashflow
0	2,000	1	2000
1	2,000	0.909	1,818
3	1,500	0.751	1,126.5
4	2,500	0.683	1,707.5
5	4,000	0.621	2,484
	NPV		9,136

Part b)

Year	Cashflow	PV factor @ 6%	PV of Cashflow
0	(2,000)	1	(2000)
1	2,000	0.943	1,886
3	1,500	0.890	1,335
4	2,500	0.840	2,100
5	4,000	0.792	3,168
	NPV	6,489