Question

For the following set of cash flows.

Year Cash Flow

0 -6,700

1 6,600

2 5,600

3 3,000

A) What is the NPV at a discount rate of 0 percent?

B) What is the NPV at a discount rate of 13 percent?

C) What is the NPV at a discount rate of 21 percent?

D) What is the NPV at a discount rate of 26 percent?

Answer 1

Years	Cash flow	Discount factor	Present Value	Discount factor	Present Value	Discount factor	Present Value	Discount factor	Present Value
		@0%		@13%		@21%		@26%
a	b	c=1.0^-a	b*c	d=1.13^-a	b*d	e=1.21^-a	b*e	f=1.26^-a	b*f
0	$      -6,700	1.000	$ -6,700	1.000	$ -6,700	1.000	$ -6,700	1.000	$ -6,700
1	$        6,600	1.000	$ 6,600	0.885	$ 5,841	0.826	$ 5,455	0.794	$ 5,238
2	$        5,600	1.000	$ 5,600	0.783	$ 4,386	0.683	$ 3,825	0.630	$ 3,527
3	$        3,000	1.000	$ 3,000	0.693	$ 2,079	0.564	$ 1,693	0.500	$ 1,500
NPV			$ 8,500		$ 5,605		$ 4,273		$ 3,565
Thus,
A)	NPV	$ 8,500
B)	NPV	$ 5,605
C)	NPV	$ 4,273
D)	NPV	$ 3,565