An investment has an installed cost of $543,507. The cash flows over the four-ye

Question

An investment has an installed cost of $543,507. The cash flows over the four-year life of the investment are projected to be $285,816, $199,306, $99,216, and $92,536. If the discount rate is zero, the NPV is $_________. Round your answer to nearest whole dollar amount. (e.g., 32)). If the discount rate is infinite, the NPV is $___________. Negative amount should be indicated by a minus sign. Round your answer to nearest whole dollar amount. (e.g., 32)). At a discount rate of __________ percent, the NPV is just equal to zero. Round your answer to 2 decimal places. (e.g., 32.16))

An investment has an installed cost of $543,507. The cash flows over the four-year life of the investment are projected to be $285,816, $199,306, $99,216, and $92,536. If the discount rate is zero, the NPV is $_________. Round your answer to nearest whole dollar amount. (e.g., 32)). If the discount rate is infinite, the NPV is $___________. Negative amount should be indicated by a minus sign. Round your answer to nearest whole dollar amount. (e.g., 32)). At a discount rate of __________ percent, the NPV is just equal to zero. Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

At disount rate of 0 NPV = 543507-(285816+199306+99216+92536)

= 133367

At discount rate of infinity NPV = initial cost of investment

= 543507

Discount rate at which NPV is zero = 10% + 2.09 i.e 12.09%

Particulars Year Cash Flows PVF @ 10% PVF @ 15% PV @ 10% PV @ 15% Cash Flows 0 (5,43,507.00)               1.00                    1.00 (5,43,507.00) (5,43,507.00) Cash Flows 1     2,85,816.00               0.91                    0.87     2,59,832.73     2,48,535.65 Cash Flows 2     1,99,306.00               0.83                    0.76     1,64,715.70     1,50,703.97 Cash Flows 3         99,216.00               0.75                    0.66         74,542.45         65,236.13 Cash Flows 4         92,536.00               0.68                    0.57         63,203.33         52,907.76 Net Present Value         18,787.21       (26,123.49)

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