Homework Answers
The correct answer is 2nd option i.e. $ 7,358,639.
Explanation :
XNPV = (rate, values, dates.)
Required rate of return is 6%.
Values = At the start of project, A company is investing $9,800,000. Hence it is an outflow of cash and therefore for calculation purpose, it is taken as negative.
The investment will start paying off $2,00,000 every month. So every other value is $2,00,000
Dates = It require all dates from the start of project till the end of project.
The project starts in November 2020. The cash inflow will start from May 2021. The project life would be to November 2030.
Following is the excel calculation.
Note = Oct 23 and April 29, are seen two images. That has happend while taking screenshot. For calculation purpose, they are taken only once.
In second last image, it shows how formulae is applied, first rate i.e. 0.06, then values; for that all the values from -98,00,000 till last 2,00,000 is taken. Last dates; for dates all the dates from November 2020 till November 2030 is considered.
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