Corp. Finance NPV Question

CFA Level II Corporate Finance
#1

Using the CFA text for Corp Finance volume page 69, question 1, page 83 has the solution, but I am a bit confused how the CFA text came to 97K as their NPV, because I calculated by hand and used calculator and got $6,794.

This is what I put on the calculator

CFO = -533K

CF1 = 146K

Freq = 4

CF2 = 124K

Freq = 1

I= 10%

CPT NPV = 6,794

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#2

They have five years of 146K cash flows; you have only four.

#3

Hi S2000magician thank you so much for taking the time to help me. I apologies for this question, but I switched the frequency to 5 for 146K, and kept 124K at 1, my total NPV was 90K, where am I off? thanks so much again

#4

Looks like a typo: should be 90,449, not 97,449.

Send a correction to CFA Insititute here.

#5

Fixed above. Since it’s a five year project, your terminal year contains both the ATOCF and TNOCF. Your CF2 is total cash flow in Yr 5.

#6

thanks so much, I really appreciate your time, thanks again!

1 Like
#7

Hi S2K, thanks so much, I really appreciate your time, thanks again!

#8

My pleasure.

#9

:smiling_face_with_three_hearts: :+1: :star: :trophy: