Question

For the following set of cash flows,

  

Year	Cash Flow
0	–$7,700
1	3,800
2	3,300
3	3,700

  

Required:
(a)	What is the NPV at a discount rate of 0 percent?
	(Click to select)$3,100.00$3,255$3,007$3,193$2,945

  

(b)	What is the NPV at a discount rate of 11 percent?
	(Click to select)$1,162.54$1,140.4$1,051.83$1,107.19$1,073.97

  

(c)	What is the NPV at a discount rate of 24 percent?
	(Click to select)$-548.68$-565.14$-576.11$-606.9$-521.25

(d)	What is the NPV at a discount rate of 29 percent?

Answer 1

a). To find the NPV, we need to put the following values in the financial calculator:

CF0 = -7,700; C01 = 3,800; F01 = 1; C02 = 3,300; F02 = 1; C03 = 3,700; F03 = 1; Press NPV, then put i = 0, press down key, then cpt, which gives, 3,100

So, NPV = $3,100Hence, Option "A" is correct.

b). To find the NPV, we need to put the following values in the financial calculator:

CF0 = -7,700; C01 = 3,800; F01 = 1; C02 = 3,300; F02 = 1; C03 = 3,700; F03 = 1; Press NPV, then put i = 11, press down key, then cpt, which gives, 1,107.19

So, NPV = $1,107.19

Hence, Option "D" is correct.

c). To find the NPV, we need to put the following values in the financial calculator:

CF0 = -7,700; C01 = 3,800; F01 = 1; C02 = 3,300; F02 = 1; C03 = 3,700; F03 = 1; Press NPV, then put i = 24, press down key, then cpt, which gives, -548.68

So, NPV = -$548.68

Hence, Option "A" is correct.

d). To find the NPV, we need to put the following values in the financial calculator:

CF0 = -7,700; C01 = 3,800; F01 = 1; C02 = 3,300; F02 = 1; C03 = 3,700; F03 = 1; Press NPV, then put i = 29, press down key, then cpt, which gives, -1,047.63

So, NPV = -$1,047.63