ollowing cash flows: 0 1 2 3 a) What is the NPV at a discount rate...

Question

Question

business accounting

Answer 1

Answer #1

NPV is calculated as PV of cash inflows minus initial investment

NPV = CF1 / (1 + R)^1 + CF2 / (1 + R)^2 + CF3 / (1 + R)^3 - CF0

When I = 0%

NPV = 7100 / (1 + 0%)^1 + 8400 / (1 + 0%)^2 + 6900 / (1 + 0%)^3 - 16400

= 6000

When I = 10%

NPV = 7100 / (1 + 10%)^1 + 8400 / (1 + 10%)^2 + 6900 / (1 + 10%)^3 - 16400

= 2180.77

When I = 20%

NPV = 7100 / (1 + 20%)^1 + 8400 / (1 + 20%)^2 + 6900 / (1 + 20%)^3 - 16400

= - 656.94

When I = 30%

NPV = 7100 / (1 + 30%)^1 + 8400 / (1 + 30%)^2 + 6900 / (1 + 30%)^3 - 16400

= -2827.40

Answer 2

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