MFT MBA Formula work Exam
Questions and Answers
Assume you are presented with an investment opportunity that would cost $3800
in today's money. Also assume you can expect to generate $1000 in income per
year for each of five years and the prevailing cost of money or interest rate is 8%.
The discount factors each year are (Y1: .926 Y2: .857 Y3: .794 Y4: .735 Y5: .681 )
What is the NPV and should you take it?
INITIAL COST - $3800
INCOME PER YR - $1000
NO. of YRS-5
a) Multiply INCOME PER YR by each YR discount rate
b)ADD all 5 yrs and subtract INITIAL COST
***IF greater than 0 -then YES take it
RETURN ON INVESTMENT (ROI)
the percentage of the total cost of purchasing an investment and the profit made
from selling that investment
IE- Investment in MexCity is 30,000,000p. Operating income of Firm X there is
6,000,000p. ROI = 6k/30k ..20%
Questions and Answers
Assume you are presented with an investment opportunity that would cost $3800
in today's money. Also assume you can expect to generate $1000 in income per
year for each of five years and the prevailing cost of money or interest rate is 8%.
The discount factors each year are (Y1: .926 Y2: .857 Y3: .794 Y4: .735 Y5: .681 )
What is the NPV and should you take it?
INITIAL COST - $3800
INCOME PER YR - $1000
NO. of YRS-5
a) Multiply INCOME PER YR by each YR discount rate
b)ADD all 5 yrs and subtract INITIAL COST
***IF greater than 0 -then YES take it
RETURN ON INVESTMENT (ROI)
the percentage of the total cost of purchasing an investment and the profit made
from selling that investment
IE- Investment in MexCity is 30,000,000p. Operating income of Firm X there is
6,000,000p. ROI = 6k/30k ..20%
