NPV USING GENERAL DISCOUNTING Nominal and Real Rates

(in thousands of $)

60 NPV Using General Discounting

0
40
20
0
-20
Cash Flows
-40
Present Value of
-60 Each Cash Flow
-80
-100
-120
0 1 2 Period3 4 5

Inputs
Period 0 1 2 3 4 5

Inflation Rate 3.0% 2.8% 2.5% 2.2% 2.0%

Real Discount Rate 4.854% 4.669% 4.683% 4.697% 4.902%

Outputs
Period 0 1 2 3 4 5
Nominal Discount Rate

Net Present Value using a Time Line

Period 0 1 2 3 4 5

Cash Flows ($100.00) $21.00 $34.00 $40.00 $33.00 $17.00

Cumulative Discount Factor 0.0%
Present Value of Each Cash Flow
Net Present Value
eal Rates

Cash Flows

Present Value of
Each Cash Flow

Add to All Periods

0.0% 2 2 2 2 2

0.0% 4 4 4 4 4

10 2 3 4 3 1
5