Derive the formula for calculation of NPV if 'NCF' represents net cash flow, 'K' represents risk adjusted discount rate, 'I' represents initial investment, and 't' represents time period:

CS Executive · Financial and Strategic Management · PYQS · June 2021
Derive the formula for calculation of NPV if 'NCF' represents net cash flow, 'K' represents risk adjusted discount rate, 'I' represents initial investment, and 't' represents time period:
(A) $NPV=\sum_{t=o}^{n}\frac{NCF}{(1+k)^{t}-I}$
(B) $NPV=\sum_{t=n}^{n}\frac{NCF}{(1+k)^{t}}-O$
(C) $NPV=\sum_{t=o}^{n}\frac{NCF}{(1+k)^{t}}-I$
(D) $NPV=\sum_{t=o}^{n}I-\frac{NCF}{(k+1)^{t-1}}$

Answer & Explanation:

Correct Answer: Option (C)

Official answer key: (C).

Topics: Capital Budgeting

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