Question

**Problem 1**- 1.Startup cost: $10,000.
- The cash flows for Years 1 through 5 are estimated to be $2500, $4000, $5000, $3000, $1000.
- Discount rate = 6%.
- PV = C/(1+r)^t
- NPV = Add all PVs and subtract investment

**Problem 2**- 2. Startup costs in Year 0: $70,000.
- The cash flows for Years 1 through 4 are estimated to be $40,000
- Discount rate = 12%.

Show Present Value for each year

Show Net Present Value after 4 years as of today

**Problem 3**- Startup costs in Year 0: $10,000.
- The cash flows for Years 1 through 5 are estimated to be $4000 in a high-demand scenario, or $1000 in a low-demand scenario.
- The probabilities of a high- or low-demand scenario are both 50 percent.
- The product concept could be abandoned after Year 1, and the equipment could be sold for $4000.
- Discount rate = 6%.
- Show Expected Value of the project as of today.

Answer #1

**Problem 1**

**(amount in $)**

Year |
Cash
Flow |
PVF @
6% |
PV |

0 | -10000 | 1 | -10000 |

1 | 2500 | .943 | 2358 |

2 | 4000 | .890 | 3560 |

3 | 5000 | .840 | 4200 |

4 | 3000 | .792 | 2376 |

5 | 1000 | .747 | 747 |

NPV |
3241 |

**Problem 2**

**(amount in $)**

Year |
Cash
Flow |
PVF @
12% |
PV |

0 | -70000 | 1 | -70000 |

1 | 40000 | .893 | 35720 |

2 | 40000 | .797 | 31880 |

3 | 40000 | .712 | 28480 |

4 | 40000 | .636 | 25440 |

NPV |
51520 |

**Problem 3**

Expected value of project as of today = [(4000*.50 +1000*.50) + 4000]*1/(1.06)1

= $ 6132.08

An investment cost $10,000 with expected cash flows of
$3,000 a year for 5 years. At what discount rate will the project’s
IRR equal its discount rate?
27.22%
15.24%
0%
16.67%
21.08%

Sharon is expecting to following cash flows: -75,000; 45,000;
10,000, and -500, in years 1, 2, 3, and 4, respectively. If the
appropriate discount rate is 9%, what is the present value of this
cash flow stream?

You receive $10,000 now for an investment that will give you
cash flows of $1000 in one year, $2000 in two years, $3000 in three
years, and $4000 in four years. If the discount rate is 5% then
what is the PV of this investment? (Enter the answer in dollar
format without $ sign or thousands comma -> 3519.23 and not
$3,519.23 or 3,519.23)

Assume a firm is evaluating a stream of cash flows. Today the
firm incurs a cost of $10,000, and then the firm receives $1,826 in
year 1, $3,822 in year 2, and $1,456 in year 3. Assume the firm has
a discount rate of 14%. Calculate the present value of
cash flows form year 1 to year 3.

Assume a firm is evaluating a stream of cash flows. Today the
firm incurs a cost of $10,000, and then the firm receives $2,559 in
year 1, $2,881 in year 2, and $2,782 in year 3. Assume the firm has
a discount rate of 12%. Calculate the present value of cash flows
form year 1 to year 3.

You are given three investment alternatives to analyze. The cash
flows from these three investments are as follows:
End of Year
A
B
C
1
$3,000
$1,000
$4,000
2
4000
1000
4000
3
5000
1000
(4,000)
4
-6000
1000
(4,000)
5
6000
4000
14000
a. What is the present value of investment A at an annual
discount rate of 9 percent? $____(Round to the nearest
cent.)
b. What is the present value of investment B at an annual
discount rate...

What is the total future value in 40 years of the following cash
flows: $10,000 invested today, $25,000 invested in 6 years and 7
months, and $50,000 invested in 15 and 2 months? Use a discount
rate .9% monthly.

What is the total future value in 40 years of the following cash
flows: $10,000 invested today, $25,000 invested in 6 years and 7
months, and $50,000 invested in 15 and 2 months? Use a discount
rate .9% monthly.

Assume a project will cost $10,000. Expected Cash Flows to be
received are $2,000 per year at end of years 1 & 2, then $4,000
per year at end of years 3 & 4 and $5,000 at the end of year 5.
No cash flows beyond year 5. Discount rate is 10%.
What is the NPV (value created)?

What is the present value the following set up cash flows at an
interest rate of 7% $1000 today $2000 at the end of the year one
$4000 at the end of the year three and $6000 at end of year
five?

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