Mathematics of FinanceMCQPYQ July 21Question 1577 of 512
All Questions

If the cost of capital be 12%\displaystyle 12\% per annual, then the net present value from given cash flow:\n\n| Year | Operating Profit (in thousands Rs.) |\n|---|---|\n| 0 | -100 |\n| 1 | 60 |\n| 2 | 40 |\n| 3 | 50 |

Options

A31048\displaystyle 31048
B34185\displaystyle 34185
C21048\displaystyle 21048
D24187\displaystyle 24187
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option c21048\displaystyle 21048

All Options:

  • A31048\displaystyle 31048
  • B34185\displaystyle 34185
  • C21048\displaystyle 21048
  • D24187\displaystyle 24187

Ad

Detailed Solution & Explanation

The net present value (NPV\displaystyle NPV) is the sum of the present values of all cash flows: NPV=CF0+CF11+i+CF2(1+i)2+CF3(1+i)3NPV = CF_0 + \frac{CF_1}{1+i} + \frac{CF_2}{(1+i)^2} + \frac{CF_3}{(1+i)^3} Given: * CF0=100\displaystyle CF_0 = -100 (in thousands) * CF1=60\displaystyle CF_1 = 60 * CF2=40\displaystyle CF_2 = 40 * CF3=50\displaystyle CF_3 = 50 * Interest rate (i\displaystyle i) = 12%\displaystyle 12\% p.a. = 0.12\displaystyle 0.12 Substituting the values: NPV=100+601.12+40(1.12)2+50(1.12)3NPV = -100 + \frac{60}{1.12} + \frac{40}{(1.12)^2} + \frac{50}{(1.12)^3} NPV=100+53.5714+31.8878+35.5890=21.0482 thousandsNPV = -100 + 53.5714 + 31.8878 + 35.5890 = 21.0482 \text{ thousands} This corresponds to Rs. 21,048\displaystyle 21,048. Hence, **Option C** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free