Why does the Net Present Value change depending on discount rate being used?
Why does the Net Present Value change depending on discount rate being used?
Homework Answers
NPV is an acronym for Net Present Value. NPV is present value of all cash inflows less present value of all cash outflows associated with the proposal. NPV relies on discount rate of return that will derived from cost of capital require to make investment. If any project with positive NPV then accept the project and if NPV is negative then project should be avoided. Independent variable is Discount rate and dependent variable is NPV. Discount rate is the rate of return used in a discounted cash flow analysis to determine the present value of future cash flows.
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Why does the Net Present Value change depending on discount
rate being used?
If the discount rate is 9 percent what is the net present value of a project...
If the discount rate is 9
percent what is the net present value of a project with the
following cash flows? Year Cash Flow 0 −$ 55,000 1 21,500 2 24,750
3 29,450
If the discount rate is 9 percent what is the net present value of a project with the following cash flows? Year Cash Flow -$55,000 21,500 24,750 29,450 WN
the interest rate increases, net present value: Increases Could increase or decrease Does not change Decreases...
the interest rate increases, net present value: Increases Could increase or decrease Does not change Decreases If you determine that the present value of a stream of payments is $20,000 and the immediate investment required to get that stream of payments is $28,000, do you make the investment? Dolphin's are friendly No Yes Need more information The intersection of the demand curve can be used to: Identify the economic value of the good or service exchanged Both of the above...
Net Present Value (NPV) analysis of a project reveals + $3 600 based on a discount...
Net Present Value (NPV) analysis of a project reveals + $3 600 based on a discount rate of 12%. What does this tell us about the financial viability of the project? What does it not tell us? Why is the NPV method considered to be theoretically superior to other methods such payback or ARR?
What is the net present value of a project with the following cash flows if the discount rate is 14 percent?
18) NET PRESENT VALUE (BASIC)What is the net present value of a project with the following cash flows if the discount rate is 14 percent?
1. At a discount rate of 10% the net present value of a project is $5,000....
1. At a discount rate of 10% the net present value of a project is $5,000. From this we can conclude that the: a. project's IRR equals 10%. b. project's IRR is greater than 10%. c. project's IRR is also $5,000.
Imagine that, with a discount rate of 5 percent, the net present value of a hydroelectric...
Imagine that, with a discount rate of 5 percent, the net present value of a hydroelectric plant with a life of 70 years is $25.73 million and that the net present value of a thermal electric plant with a life of 35 years is $18.77 million. Rolling the thermal plant over twice to match the life of the hydroelectric plant thus has a net present value of ($18.77 million) + ($18.77 million)/(1 + 0.05)35 = $22.17 million. Now assume that...
Assuming an annual effective discount rate of 6%, what is the net present value of a...
Assuming an annual effective discount rate of 6%, what is the net present value of a project that requires an investment of $75,000 now, and returns 2,000(13 − t) at times t = 1,2,··· ,12 (i.e, $24,000 at time 1, $22,000 at time 2, $20,000 at time 3, etc.)?
The internal rate of return is the discount rate which will equate the present value of...
The internal rate of return is the discount rate which will equate the present value of net cash inflows to the initial cost of investment the liquidation value of the project the salvage value of the project the future value of cash flows none of the above
Explain how a net present value (NPV) profile is used to compare projects. How does this...
Explain how a net present value (NPV) profile is used to compare projects. How does this compare to internal rate of return (IRR)? How does reinvestment affect NPV and IRR?
QUESTION 4 Present Value of $1 Discount Present Value of an Annuity of S1 Rate Discount...
QUESTION 4 Present Value of $1 Discount Present Value of an Annuity of S1 Rate Discount Rate Periods 1 8 % 10% 8% 10% 5 0.6806 0.6209 3.9927 3.7908 7 0.5835 0.5132 5.2064 4.8684 0.5002 0.4241 6.2469 5.7590 The present value of an obligation of $8,000 payable in 7 years at 8% is: O $6,412 O $3,520 $7,360 $4,668
If the discount rate is 9
percent what is the net present value of a project with the
following cash flows? Year Cash Flow 0 −$ 55,000 1 21,500 2 24,750
3 29,450
If the discount rate is 9 percent what is the net present value of a project with the following cash flows? Year Cash Flow -$55,000 21,500 24,750 29,450 WN
the interest rate increases, net present value: Increases Could increase or decrease Does not change Decreases If you determine that the present value of a stream of payments is $20,000 and the immediate investment required to get that stream of payments is $28,000, do you make the investment? Dolphin's are friendly No Yes Need more information The intersection of the demand curve can be used to: Identify the economic value of the good or service exchanged Both of the above...
18) NET PRESENT VALUE (BASIC)What is the net present value of a project with the following cash flows if the discount rate is 14 percent?
QUESTION 4 Present Value of $1 Discount Present Value of an Annuity of S1 Rate Discount Rate Periods 1 8 % 10% 8% 10% 5 0.6806 0.6209 3.9927 3.7908 7 0.5835 0.5132 5.2064 4.8684 0.5002 0.4241 6.2469 5.7590 The present value of an obligation of $8,000 payable in 7 years at 8% is: O $6,412 O $3,520 $7,360 $4,668
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