Value PV = $15,000 / (1+.07) 1

¶ … Value PV = $15,000 / (1+.07)^1 = $14,018.69. At 4%, this is $15,000 / (1.04) = $14,423.08 The PV of Account A is 6500 / 1.06 = $6,132.07. The PV of Account B. is 12,600 / (1.06)^2 = $11,213.96 Income PV NPV The present value of the entire income stream is $168,459,500. Income PV NPV Income PV NPV What this example shows is that the net present value of a future cash flow increases with a lower discount rate. The reason for this is that a lower discount rate means the less purchasing power of the future cash flow is diminished.

So in this situation the gold mine is worth more at a 3% rate than a 5% rate, and both are worth more than at a 7% rate. A. The project's NPV at a discount rate of 0% is $670,000 The project's NPV at a discount rate of 2% is $614,353 The project's NPV at a discount rate of 6% is $514,815 The project's NPV at a discount rate of 11% is $408,997 The project's modified internal rate of return is 28% at the 11% reinvest rate.

If the reinvest rate is 6%, the MIRR is 33%, and if the project's reinvest rate is 2%, then the MIRR is 37%. The graph shows that the rate of return for this to deliver an even net present value is very high -- around 45%. At any point below 45% on the horizontal axis, this project will have a positive net present value. Once the x-axis has been crossed, the project will have a negative NPV. B. The internal rate of return on this project is 4%.

If the discount rate is 1%, the NPV is $65,358 If the discount rate is 4%, the NPV is $7,593 If the discount rate is 10%, the NPV is -$91,777 If the discount rate is 18%, the NPV is -$197,892 The curve in this case intersects the x-axis at 4%. This is consistent with the IRR that was calculated and with the fact that at a 4% discount rate the.