Initial outlay 175 and positive cash flows after that 25, 175, and 50.Īs far as entering those, this is exactly the same as what I showed you before. Positive Net Present Value when we use 10%. Our internal rate of return should be higher than that 10% because we had a So clearly, in order to get to a zero Net Present Value, we’re going to have to increase that. We had a positive Net Present Value at a discount rate of 10%. So, clearing this off, we’ll see we’ve got four to enter, so let’s go through that entering procedure. And this wouldĪctually be cash flow 3 because that’s the third different cash flow out here beyond CF0, our -175. And then we’d say the frequency of cash flow 2 is 2 because there’s 2 of these $100 payments in a row. So this would be cash flow 1, and this would be cash flow 2. Say that this cash flow was $100 instead of $75. So here, we’re going to have to enter in 1, 2, 3, and 4 because they’re all different. Now, one thing about entering these cash flow keys is we’re going to tell it how many of these in a row there are. So we need to enter these expected cash flows. There we had a payment, but it had to be the same payment every period. We talked about using the time value of money keys.
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