Mathematics of FinanceMCQPYQ July 21Question 1577 of 512
All Questions

If the cost of capital be $12\%$ 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 |

Select Your Answer (Keyboard: A, B, C, D)
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option c — $21048$

All Options:

  • A$31048$
  • B$34185$
  • C$21048$
  • D$24187$

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 + \displaystyle \frac{CF_1}{1+i} + \frac{CF_2}{(1+i)^2} + CF3(1+i)3\displaystyle \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 p.a. = $0.12 Substituting the values: NPV=−100+601.12+40(1.12)2+50(1.12)3NPV = -100 + \displaystyle \frac{60}{1.12} + \frac{40}{(1.12)^2} + 50(1.12)3\displaystyle \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  thousands\displaystyle \text{ thousands} This corresponds to Rs. $21,048$. 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