Quantitative Methods - Quantitative Methods Section 1
6. The incremental after-tax cash flows of a project are given below:
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow (€) | -50,000 | 25,000 | 20,000 | 10,000 | 3,000 |
Using 12 percent as the discount rate, the NPV (in €) of the project is closest to:
- Option : A
- Explanation : Enter the given cash flows and the given discount rate into a financial calculator and solve for NPV. CF0 = –50,000, CF1 = 25,000, CF2 = 20,000, CF3 = 10,000, CF4 = 3,000, i = 12%. Compute PV. The NPV is –2,710.
- Option : B
- Explanation : Using a financial calculator, enter the following cash flows to compute NPV. CF0 = -750,000; CF1 = 200,000; CF2 = 300,000; CF3 = 400,000; I = 10; CPT NPV = -19,722.
- Option : A
- Explanation : Using a financial calculator, enter the following cash flows to compute IRR. CF0 = -750,000, CF1 = 200,000, CF2 = 300,000, CF3 = 400,000, CPT IRR = 8.65%.
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