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Hi,
If you are given a discount factor of 12.5% in a NPV calculation, how do you go about using the present value table please?
Thanks!
You can’t use tables and you will have to calculate discount factors from first principles. So for a rate of 12.5 (where ^ means raise to the power):
Yr 1 factor = 1/(1 +0.125)^1
Yr 2 factor = 1/(1 +0.125)^2
Yr 3 factor = 1/(1 +0.125)^3etc
Thank you.
Therefore the results would be:
Yr 1 = 0.888
Yr 2 = 0.790
Yr 3 = 0.702Correct?
I’m asking as the answer says differently but I do not know how to calculate it any other way…
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