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Chapter 7

Question 9

Net present value

Calculate the net present value of the following cash flows, discounted at a rate
of 10%:

Timing Cash flow

0 (9,000)
1 4,000
2 2,500
3 2,000
4 2,000

Timing Cash flow Discount factor Present value

0 (9,000) 1 (9,000)
1 4,000 0.909 3,636
2 2,500 0.826 2,065
3 2,000 0.751 1,502
4 2,000 0.683 1,366

NPV = (431)

Illustrations and further practice

Now read illustration 6 ‘Net present value’ and try TYUs 10 to 12 from
Chapter 7.

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