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Dear sir, please help me to explain the question 161 of revision kit.How to calculate NPV (1013), (216),1378 in the 1 st senario?Thank you
If the cash flows new $1M in the first year and $2M in the second year, then discount each at 12% gives PV’s of 893 and 1,594.
Since the investment cost $3,500, the NPV is 893 + 1594 – 3500 = (1,013)
It is the same logic for all of the others 🙂
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