Question
3- a) How do you calculate the present value of a future cash flow and how do you calculate the future value of a present
3- a) How do you calculate the present value of a future cash flow and how do you calculate the future value of a present cash flow? Explain by writing down the formulas and verbally explaining. b) Explain how you would calculate the net present value (NPV) of a project that you, as a financial manager, consider investing in. Now, assume that the project details are as following: project life: 3 years initial investment to be made today = 1million TL. Cash inflows at years 1 to 3 respectively = 0.5m, 1m and 2m TL Would you invest in the project if the discount rates were at an extreme of 0%? Would you invest in the project if the discount rates were at an extreme of 100%? Briefly explain why with an emphasis on the role of the discount rate in calculations.
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