Question

A project has the following cash flows:

Year Cash Flow

0 –$ 16,600

1 7,300

2 8,600

3 7,100

What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

What is the NPV at a discount rate of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What is the NPV at a discount rate of 19 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What is the NPV at a discount rate of 28 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Cash Flows:
Year 0 = -$16,600
Year 1 = $7,300
Year 2 = $8,600
Year 3 = $7,100

Answer a.

Discount Rate = 0%

NPV = -$16,600 + $7,300 + $8,600 + $7,100
NPV = $6,400

Answer b.

Discount Rate = 12%

NPV = -$16,600 + $7,300/1.12 + $8,600/1.12^2 + $7,100/1.12^3
NPV = $1,827.36

Answer c.

Discount Rate = 19%

NPV = -$16,600 + $7,300/1.19 + $8,600/1.19^2 + $7,100/1.19^3
NPV = -$179.28

Answer d.

Discount Rate = 28%

NPV = -$16,600 + $7,300/1.28 + $8,600/1.28^2 + $7,100/1.28^3
NPV = -$2,262.31