What is the net present value of the following set of cash flows at a discount rate of 7 percent? At 20 percent?
A) $4,518.47; $628.30
B) $4,518.47; -$321.76
C) $4,518.47; -$525.13
D) $4,722.09; $504.21
E) $4,722.09; -$418.05

Question

What is the net present value of the following set of cash flows at a discount rate of 7 percent? At 20 percent? 
A) $4,518.47; $628.30 
B) $4,518.47; -$321.76 
C) $4,518.47; -$525.13 
D) $4,722.09; $504.21 
E) $4,722.09; -$418.05

Quizplus · Accepted Answer

Using a financial calculator, the net present value of the cash flows at a discount rate of 7% is $4,518.47, and the net present value at a discount rate of 20% is -$321.76. Choice B is the only one that matches these values. The negative net present value at 20% indicates that the investment would not be profitable at that high of a discount rate.

What Is the Net Present Value of the Following Set