Answer:
Present value = $31,047,749
No. The present value when the interest rate is 12% is less than the present value when the interest rate is 5%
Explanation:
Present value is the sum of discounted cash flows.
Present value can be calculated using a financial calculator
Cash flow each year from year 1 to 8 = $6,250,000
I = 12%
Present value = $31,047,748.54
Present value when interest rate is 5% = $40,395,079.75
The present value when interest rate is 5% is greater than the present value when interest rate is 12%
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
