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8. Calculate the NPV if the discount rate is 8%. 2pts CFo = -1,000,000 CF1 =...

8. Calculate the NPV if the discount rate is 8%. 2pts

CFo = -1,000,000

CF1 = 400,000

CF2 = 400,000

CF3 = 400,000

CF4 = 400,000

CF5 = 400,000

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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=400,000[1-(1.08)^-5]/0.08

=400,000*3.992710037

=$1,597,084.01

NPV=Present value of inflows-Present value of outflows

=$1,597,084.01-$1,000,000

=$597,084.01(Approx).

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