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A3 4b We have two mutually exclusive investments with the following cash flows:                                                                                                   Year Investment A Investment B 0 –$100 –$100 1 10 50 2 30 40 3 50 30 4 70 20   b. Calculate the NPV profile for each investment, using the discount rates of 0%, 5%, 10%, 15%, 20%, and 25%. Perform this task in an Excel spreadsheet. Cautionary note: If you use the =NPV() function in Excel to calculate the NPVs, it will provide incorrect answers. The NPV() function actually calculates the present value of all cash inflows. The NPV should be calculated as =NPV(all cash inflows) – initial cash outflow.

A3 4b We have two mutually exclusive investments with the following cash flows:                                                                                                   Year Investment A Investment B 0 –$100 –$100 1 10 50 2 30 40 3 50 30 4 70 20   b. Calculate the NPV profile for each investment, using the discount rates of 0%, 5%, 10%, 15%, 20%, and 25%. Perform this task in an Excel spreadsheet. Cautionary note: If you use the =NPV() function in Excel to calculate the NPVs, it will provide incorrect answers. The NPV() function actually calculates the present value of all cash inflows. The NPV should be calculated as =NPV(all cash inflows) – initial cash outflow.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A3 4b

We have two mutually exclusive investments with the following cash flows:                                                                                                  

Year

Investment A

Investment B

0

–$100

–$100

1

10

50

2

30

40

3

50

30

4

70

20

 

b. Calculate the NPV profile for each investment, using the discount rates of 0%, 5%, 10%, 15%, 20%, and 25%. Perform this task in an Excel spreadsheet. Cautionary note: If you use the =NPV() function in Excel to calculate the NPVs, it will provide incorrect answers. The NPV() function actually calculates the present value of all cash inflows. The NPV should be calculated as =NPV(all cash inflows) – initial cash outflow.     

 

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