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Chapter 3
Question 3
NPV
Calculate the NPV of the following cash flows at a discount rate (cost of capital)
of 8%.
Year $
t0 (25,000)
t1 10,000
t2 9,000
t3 8,000
t4 5,000
Year $ Discount PV
factors 8%
0 (25,000) 1 (25,000)
1 10,000 0.926 9,260
2 9,000 0.857 7,713
3 8,000 0.794 6,352
4 5,000 0.735 3,675
NPV 2,000
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