Given the following data for Project M:
$\begin{array}{c}
\begin{array}{lll}
\
\text {Cash flow in real terms:}\
\text {Real discount rate $ =\mathbf{5} \% $}\
\text {Nominal discount rate $ =10 \% $}\
\text {Calculate the NPV of the project}
\end{array}
\begin{array}{lll}
C_{0} & C_{1} & C_{2} \
-200 & 150 & 120\
\
\
\
\end{array}
\end{array}$

A) $51.70
B) $35.54
C) $45.21
D) None of the above

Question

Given the following data for Project M:
$\begin{array}{c}
\begin{array}{lll}
\
\text {Cash flow in real terms:}\
\text {Real discount rate $ =\mathbf{5} \% $}\
\text {Nominal discount rate $ =10 \% $}\
\text {Calculate the NPV of the project}
\end{array}
\begin{array}{lll}
C_{0} & C_{1} & C_{2} \
-200 & 150 & 120\
\
\
\
\end{array}
\end{array}$

A) $51.70
B) $35.54
C) $45.21
D) None of the above

Quizplus · Accepted Answer

The NPV of the project is $51.70. This is calculated by taking the present value of the cash flows, using the real discount rate of 5%. The present value of the cash flows is $150/(1.05)^1 + $120/(1.05)^2 - $200 = $51.70.

Given the Following Data for Project M A) $5170 B) $35

Given the Following Data for Project M A) $5170
B) $35