Net Present Value Calculation | CFA® Level 1 Exam Preparation

Net Present Value Calculation

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Question

What is the Net Present Value of this series of annual cash flows at an interest rate of 12% per year: Year 0: <$14,000>, Year 1: $5,000, Year 2: $4,000, Year 3:

$5,000, Year 4 are used to indicate a negative number).

Answers

A. <$379.31>

B. $114.37

C. <$77.49>

D. $51.21

E. <$245.97> E

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Explanations

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A. B. C. D. E.

Explanation

On the BAII Plus, press CF 2nd CLRWork 14000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 5000

ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 12 ENTER DownArrow CPT. On the HP12C, press these keys:

14000 CHS BlueShift CFo 5000 BlueShift CFj 4000 BlueShift CFj 5000 BlueShift CFj 4000 BlueShift CFj. Then press 12 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure the BAII Plus has the value of P/Y set to 1.

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