Question

What is the net present value of the following stream of cash flows if the discount rate is 11.5%?

O Year 0:-$379 M
O Year 1: $105 M
O Year 2: $78 M
O Year 3: $79 M
O Year 4: $65 M
O Year 5: $65 M

Answer 1

-$86.05

Step-by-step explanation:

The computation of the net present value is shown below:

Year Cash flow Discount factor @11.5 Present value

0 $379 M 1 -$379 M

1 $105 M 0.8968609865 $94.17 M

2 $78 M 0.8043596292 $62.74 M

3 $79 M 0.7213987706 $56.27 M

4 $65 M 0.6469944131 $42.05 M

5 $65 M 0.5802640476 $37.72 M

NPV -$86.05 (Difference)

The discount factor should be computed below

= 1 ÷ (1 + rate) ^ years