Please answer them correctly. Here are 2 short problems. Please solve all 2 problems. I would...

4.2 Ratings (501 Votes)

Real return = ((1+nominal return)/(1+inflation rate)-1)*100

0.17=((1+Nominal return)/(1+0.04)-1)*100

Nominal return = 21.68

Sofa
Discount rate	0.2168
Year	0	1	2	3
Cash flow stream	-200	300	300	300
Discounting factor	1	1.2168	1.480602	1.801597
Discounted cash flows project	-200	246.5483	202.6203	166.5189
NPV = Sum of discounted cash flows
NPV Sofa =	415.69 = price
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Increase in working cap = cash+inventories+accnt receivables-accnt payables

=10000+27000+25000-5000=57000

Working capital
Discount rate	0.09
Year	0	1	2	3	4	5	6	7	8
Cash flow stream	-57000	0	0	0	0	0	0	0	57000
Discounting factor	1	1.09	1.1881	1.295029	1.4115816	1.538624	1.6771	1.828039	1.992563
Discounted cash flows project	-57000	0	0	0	0	0	0	0	28606.38
NPV = Sum of discounted cash flows
NPV Working capital =	-28393.62
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

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