. 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.
. 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.
Chapter8: Risk And Rates Of Return
Section: Chapter Questions
Problem 7PROB
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A3 3b
3. 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
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