A3 4b
We have two mutually exclusive investments with the following cash flows:
Year
Investment A
Investment B
0
–$100
1
10
50
2
30
40
3
4
70
20
b. Calculate the NPV profile for each investment, using the discount rates of 0%, 5%, 10%, 15%, 20%, and 25%. Perform this task in an Excel spreadsheet.Cautionary note:If you use the =NPV() function in Excel to calculate the NPVs, it will provide incorrect answers. The NPV() function actually calculates the present value of all cash inflows. The NPV should be calculated as =NPV(all cash inflows) – initial cash outflow.
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