- CFA Exams
- CFA Exam: Level I 2021
- Study Session 10. Corporate Finance (1)
- Reading 32. Capital Budgeting
- Subject 3. Investment Decision Criteria

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**CFA Practice Question**

A corporation has the following opportunity to invest in a project with a return of $77,000 in one period. The current investment is $69,000. The financial market rate is 12%. What is the NPV and the investing decision?

B. $280; yes

C. -$250; no

A. $250; yes

B. $280; yes

C. -$250; no

Correct Answer: C

NPV = -69,000 + (77,000/1.12) = -69,000 + 68,750 = -250

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**User Contributed Comments**
16

User |
Comment |
---|---|

Done |
You have to know how to use your calculator for these problems |

soarer1 |
How do you do this on th BAII Plus? |

hannovanwyk |
HP 10 B so much easier with these calculations than 12c, just a pity they not permitted... |

JimM |
On a BAII Plus: Hit CF 69000 / change sign / Enter (this is CFo, initial cash flow; it's negative 'cause it's an outflow) Down arrow to see C01 (1st period cash flow) 77000 / Enter (positive 'cause it's an inflow) (F01 = 1; single cash inflow of that size) Hit NPV 12 / Enter (this is I, interest rate) Down arrow to see NPV Hit CPT (compute) Result = -250 |

johnowens |
wow, thats a long way about it how about just... PV FCF = 77,000/1 + 12% = 68,750 thats 250 less than the outlay |

mwali |
Can someone please go thru the calculation of NPV using BAII plus. I have been trying the procedures by others but it does not seem to work out.JimM please assist |

lavalyn |
The BA II manual is not bad. You should generally use [2nd][Clr work] before any new calculation. Press CF to enter the cash flow worksheet, clear previous work, then use the instructions by JimM. |

peteypete |
Its not hard if you know the formula and past high school math. |

EMerkert |
Much easier for these simple problems to know the math, and less likely to punch an incorrect button on the calc. |

Nomni |
Can someone assist if you're using HP 12c Platinum |

dipu617 |
BA II Plus: CF0: -69000 [enter] CF1: 77000 [enter] Press NPV I: 12% [enter] Press down arrow Press CPT NPV: -250 |

papajeff |
Doing the quant section first will really help, these calculations are simple if you have practiced using your calculator and understand the theory. |

johntan1979 |
Simple questions like this, don't waste your time using TI BA II Plus. Just remember the formula. It's only 1 period, so it's the 1 period's return over 1+0.12 minus initial investment. |

jonan203 |
Nomni: 69,000 <CHS><g><CFo> 77,000 <g><CFj> 12 <i> 1 <n> <f><NPV> = -250 |

Bududeen |
good job jonan203 |

Freddie33 |
All ya numpties doing dumb shit with calculators when I worked out it had to be negative in 5 seconds and I'm dum |