Practice question · Estimate

A project costs 200k€ and pays 110k€ at the end of each of years 1 and 2. At $r = 10\%$ , set the slider to its NPV in k€.

Estimate on a scale from -50k€ (-50) to +50k€ (50).

Hints

$110/1.1 = 100$ ; $110/1.21 \approx 90.9$ .
Sum the PVs and subtract 200.

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-9.1 (answers within ±3 count)

Why

$NPV = -200 + 100 + 90.9 = -9.1$ k€. The undiscounted total (+20k€) looked fine, discounting exposes the loss. That gap is the whole reason NPV exists.

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A project costs 200k€ and pays 110k€ at the end of each of years 1 and 2. At r=10%r = 10\%r=10%, set the slider to its NPV in k€.

Practise NPV and IRR

More questions on NPV and IRR

A project costs 200k€ and pays 110k€ at the end of each of years 1 and 2. At $r = 10\%$ , set the slider to its NPV in k€.