Answered: What is the NPV for the following set…

What is the NPV for the following set of cash flows with a discount rate of 16.7 percent? (Round answer to two decimals, i.e. 32.16) Period Cash Flow 0 -6700 1 2200 2 3800 3 9000 4 4000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter11: Venture Capital Valuation Methods

Section11.7: Introducing Scenarios To Vcscs

Problem 3CC

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

What is the NPV for the following set of cash flows with a discount rate of 16.7 percent? (Round answer to two decimals, i.e. 32.16)

Period

Cash Flow

-6700

2200

3800

9000

4000

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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