Answered: What is the discount rate at which the…

Business

Finance

What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.12: Uneven, Or Irregular, Cash Flows

Problem 3ST

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -116,000
Year 1 cash flow = 28,000
Year 2 cash flow = 43,000
Year 3 cash flow = 38,000
Year 4 cash flow = 41,000
Year 5 cash flow = 40,000
Year 6 cash flow = 37,000

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