¶ … 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...

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…