In Using Microsoft^© Excel to Calculate NPV of a Capital

question 50

Short Answer

In using Microsoft^© Excel to calculate NPV of a capital investment, the following data was input:
$\begin{array}{|c|c|c|c|c|c|c|}\hline & \mathbf{A} & \mathbf{B} & \mathbf{C} & \mathbf{D} & \mathbf{E} & \mathbf{F} \\\hline \mathbf{1} & & 1-1-10 & 2010 & 2011 & 2012 & 2013 \\\hline \mathbf{2} & \text { Cash flows } & -46,000 & 12.600 & 18,500 & 21,500 & 10,500 \\\hline\end{array}$
Which choice is a correct format in which to enter into the NPV wizard if the discount rate is 9.72%?
$\quad\text { Rate \quad\quad Value1\quad\quad Value2 \quad Value3\quad value4 \quad value5 }$
A. $\quad 9.72 \quad \quad 12,600 \quad\quad 18,500 \quad 21,500 \quad 10,500\quad 0$
B. $\quad 0.972 \quad\quad 12,600 \quad\quad 18,500 \quad 21,500 \quad 10,500 \quad 0$
C. $\quad 9.72 \quad -46,000 \quad\quad 12,600 \quad 18,500 \quad 21,500 \quad10,500$
D. $\quad 0.0972\quad12,600\quad\quad18,500\quad21,500\quad10,500\quad0$

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers is equal to the quantity supplied by producers, resulting in market stability.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that producers are willing to supply.

Tax

A compulsory financial charge or other levy imposed by a government to fund public expenditures.

Demand Function

A mathematical representation showing the relationship between the quantity demanded of a good and its price, along with other factors affecting demand.