What is the net present value of the following cash flow sequence at a discount rate of 11 percent? $\frac { \underline { \mathrm { t } = 0 } } { - 120.000 } \quad \frac { \mathrm { t } = 1 } { 00.000 } \quad \frac { \underline { \mathrm { t } = 2
} }{ - 100.000 }$
A)$69,108.03
B)$231,432.51
C)$80,000.00
D)$88,000.00

Question

What is the net present value of the following cash flow sequence at a discount rate of 11 percent? $\frac { \underline { \mathrm { t } = 0 } } { - 120.000 } \quad \frac { \mathrm { t } = 1 } { 00.000 } \quad \frac { \underline { \mathrm { t } = 2
 } }{ - 100.000 }$
A)$69,108.03
B)$231,432.51
C)$80,000.00
D)$88,000.00

Quizplus · Accepted Answer

Using the formula for net present value (NPV):

NPV = CF0 + CF1/(1+r) + CF2/(1+r)^2

Where CF0 is the initial cash flow, CF1 is the cash flow in year 1, CF2 is the cash flow in year 2, and r is the discount rate.

Plugging in the values:

NPV = -120000 + 100000/(1+0.11) + (-100000)/(1+0.11)^2

NPV = -120000 + 90090.09 + (-74190.08)

NPV = $69,108.03

Therefore, the best choice is A.

What Is the Net Present Value of the Following Cash