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Discounting and investment appraisal

Question 8

Net present value

Calculate the net present value of the following cash flows, discounted at a rate
of 5%:

Timing Cash flow

0 (70,000)
1 30,000
2 20,000
3 15,000
4 15,000

Timing Cash flow Discount factor Present value

0 (70,000) 1 (70,000)
1 30,000 0.952 28,560
2 20,000 0.907 18,140
3 15,000 0.864 12,960
4 15,000 0.823 12,345

NPV = 2,005

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