The NPV (net present value)of a cash stream that is equal to $100 per period for 5 periods with a rate of return of 12% per period would be
A)$360.48.
B)$382.98.
C)$403.73.
D)$416.51.

Question

Quizplus · Accepted Answer

The NPV is calculated as the sum of the present values of each cash flow. The present value of each cash flow is calculated as the cash flow divided by (1 + r)^n, where r is the rate of return and n is the number of periods. In this case, the NPV is calculated as follows:NPV = $100 / (1 + 0.12)^1 + $100 / (1 + 0.12)^2 + $100 / (1 + 0.12)^3 + $100 / (1 + 0.12)^4 + $100 / (1 + 0.12)^5= $100 / 1.12 + $100 / 1.2544 + $100 / 1.4049 + $100 / 1.5735 + $100 / 1.7623= $89.29 + $79.72 + $71.22 + $63.55 + $56.73= $360.48

The NPV (Net Present Value)of a Cash Stream That Is