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
Problem 1PS
Related questions
Question
Answers with explanation and excel formulas please
Transcribed Image Text:3)
You are given the following time line;
CFs are at the end of the year.
Years:
1
2
3
4
CF $s
(10,000.00)
1500
1500
3000
4500
5000
Rate:
12.00%
a)
Calculate the PV of the CFs
b)
If the CFs in this problem were part of a Net Present Value (NPV) calculation, what would be the
NPV of this calculation?
c)
What is the IRR of the CFs?
Expert Solution
Step 1
Formula to calculate PV of cash flows is:
PV = FV/(1+r)^n
Formula to calculate NPV is:
NPV = cash flow/(1+i)^t - Initial investment
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