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# Learning NPV and Cash Flows

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I am practicing in my NPV and other cash flows analysis methods. Please show me the steps and formulas used to arrive to solutions.

Problem#1
What is the net present value of the following cash flows at a discount rate on 12%.
T=0/-250,000 t=1/100,000 t=2/150,000 t=3/200,000.

Problem#2
You would like to have enough money saved to receive a \$100,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that perpetuity payments start one year from the date of your retirement. The interest rate is 10%)?

Problem#3
You would like to have enough money saved to receive a growing perpetuity, growing at a rate of 5% per year, the first payment being \$100,000, after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the growing perpetuity payments start one year from the date of your retirement. The interest rate is 10%)?

Problem#4
Macrohard Company expects to pay a dividend of \$6 per share at the end of year one, \$8 per share at the end of year two and then be sold for \$136 per share. If the required rate on the stock is 20%, what is the current value of the stock?

#### Solution Summary

The expert examines learning NPV and cash flows. The money received for money is discussed.

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## Cash Flow Diagram of Inflows and Outflows

The Excel spreadsheet template provided below contains detailed directions and figures regarding Blue Mesa's new project. Use the template to create a cash flow diagram of the project's inflows and outflows, as follows:

Input the yearly project inflows
Compute the discount factor for each year
Compute the NPV of the project
Using the cash flows in the template, use the IRR formula to calculate the IRR of the project

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