CFA Practice Question

There are 233 practice questions for this study session.

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?

A. $250; yes
B. $280; yes
C. -$250; no
Correct Answer: C

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

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
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