Capital Budgeting

CFA Level II
#1

Hi all,

Few questions on the capital budgeting practice problems in the CFA book. For the first question I am getting an NPV of roughly 6.7k which is obviously way out from the $97,449 the book is saying is the answer.

I have an outlay of -533k

after tax OCF of 146k for years 1-4

TNOCF of 124k for year 5

This is all in line with the solution, but my NPV is wrong? not sure what I doing wrong here?

Also for q2 could you help me understand the logic in just adding discounting the after tax dep’n to get the change in NPV? I assume this is because there has been no change in cash op revenus, cash op expenses or salvage value?

#2

Check whether TNOCF is in year 4 together with OCF 4. Also, check if you entered a valid prefix. - for Inflow in project, + for outflows.