No.

12
Finance 305, FALL 2012
HW No. 7
Page 1

NPV Using General Discounting Nominal Rate

(in thousands of $)

NPV Using General Discounting

Inputs
$60.00
$40.00
$20.00

Cash Flows
$0

$(20.00)
$(40.00)
$(60.00)

Period
Nominal Discount Rate
Net Present Value using a Time Line
Period
Cash Flows
Cumulative Discount Factor
Present Value of Each Cash Flow
Net Present Value

1
6.4%

Period

2
6.2%

3
6.0%

4
5.7%

5
5.4%

0
1
2
3
4
5
$ (54.39) $ 19.27 $ 27.33 $ 34.94 $ 41.76 $ 32.49
0.00%
6.40%
13.00%
19.78%
26.60%
33.44%
$ (54.39) $ 18.11 $ 24.19 $ 29.17 $ 32.98 $ 24.35
$ 74.41

Present Value of Each Cash

Flow

No. 12
Finance 305, FALL 2012
HW No. 7
Page 2

NPV Using General Discounting Nominal Rate and Real Rates

(in thousands of $)

NPV Using General Discounting

$300.00
$200.00
$100.00
Cash Flows

$$(100.00) 0

6
Present Value of Each Cash
Flow

$(200.00)
$(300.00)

Inputs
Period
Inflation Rate
Real Discount Rate
Outputs
Period
Nominal Discount Rate
Net Present Value using a Time Line
Period
Cash Flows
Cumulative Discount Factor
Present Value of Each Cash Flow
Net Present Value

$(400.00)

Axis Title

1
3.4%
7.8%

2
3.6%
7.1%

3
3.9%
6.5%

4
4.4%
6.0%

5
4.7%
5.4%

1
11.47%

2
10.96%

3
10.65%

4
10.66%

5
10.35%

0
$ (328.47)
0.00%
$ (328.47)
$ 138.31

1
$87.39
11.47%
$78.40

2
$134.97
23.68%
$109.13

3
$153.28
36.85%
$112.00

4
$174.99
51.45%
$115.55

5
$86.41
67.13%
$51.70

Each Cash