### 1.

**Basic DCF Calculation**

**Question:** A company is expected to generate cash flows of $100,000 per year for the next 5 years. The
discount rate is 10%. What is the present value of these cash flows?

**Solution:**

PV = CF / (1 + r)^t

where CF = Cash Flow, r = discount rate, t = time period

PV = $100,000 / (1 + 0.10)^1 + $100,000 / (1 + 0.10)^2 + $100,000 / (1 + 0.10)^3 + $100,000 / (1 + 0.10)^4 +

$100,000 / (1 + 0.10)^5

= $90,909 + $82,645 + $75,131 + $68,301 + $62,092

= $379,078

### 2. **Terminal Value Calculation**

**Question:** A company is expected to generate cash flows of $150,000 per year for 5 years, after which a
perpetuity grows at a rate of 3% per year. If the discount rate is 12%, what is the terminal value at the end of year 5?

**Solution:**

Terminal Value = CF * (1 + g) / (r - g)

where CF = Cash Flow in year 5, g = growth rate, r = discount rate

Terminal Value = $150,000 * (1 + 0.03) / (0.12 - 0.03)

= $150,000 * 1.03 / 0.09

= $1,716,667

### 3. **Calculating DCF with Growing Cash Flows**

**Question:** A company expects to generate cash flows of $120,000, growing at 5% annually, for 5 years. The
discount rate is 8%. What is the present value of these cash flows?

**Solution:**

Using the formula for growing annuities:

PV = CF * [(1 - (1 + g)^( -n)) / (r - g)]

where CF = cash flow in the first year, g = growth rate, n = number of years, r = discount rate

PV = $120,000 * [(1 - (1 + 0.05)^(-5)) / (0.08 - 0.05)]

= $120,000 * [4.1002]

= $492,024

### 4. **DCF with Constant Cash Flows**

**Question:** A company is expected to generate cash flows of $200,000 per year indefinitely. If the discount rate
is 9%, what is the value of this perpetuity?

**Solution:**

Perpetuity Value = CF / r

= $200,000 / 0.09

= $2,222,222

### 5. **DCF for a Project**

**Question:** A project requires an initial investment of $500,000 and will generate cash flows of $150,000 per
year for 4 years. The discount rate is 11%. What is the net present value (NPV) of the project?

**Solution:**
NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + CF / (1 + r)^3 + CF / (1 + r)^4] - Initial Investment

= [$150,000 / (1 + 0.11)^1 + $150,000 / (1 + 0.11)^2 + $150,000 / (1 + 0.11)^3 + $150,000 / (1 + 0.11)^4] -

$500,000

= $135,135 + $121,953 + $109,892 + $98,908 - $500,000

= $465,888 - $500,000

= -$34,112

### 6. **DCF with Variable Cash Flows**

**Question:** Calculate the present value of cash flows for the next 3 years where cash flows are $80,000, $90,000,
and $100,000 respectively. The discount rate is 10%.

**Solution:**

PV = $80,000 / (1 + 0.10)^1 + $90,000 / (1 + 0.10)^2 + $100,000 / (1 + 0.10)^3

= $72,727 + $65,216 + $59,015

= $196,958

### 7. **Discount Rate Impact**

**Question:** A company has a projected cash flow of $250,000 in year 1, with a discount rate of 15%. What is the
present value of this cash flow?

**Solution:**

PV = CF / (1 + r)^t

= $250,000 / (1 + 0.15)^1

= $217,391

### 8. **Calculating the NPV of a Growing Perpetuity**

**Question:** A company expects to grow its cash flows at 4% annually indefinitely, starting at $60,000. The
discount rate is 10%. What is the present value of this growing perpetuity?

**Solution:**

Perpetuity Value = CF / (r - g)

= $60,000 / (0.10 - 0.04)

= $60,000 / 0.06

= $1,000,000

### 9. **DCF with Initial Investment**

**Question:** An investment requires an initial outlay of $1,000,000 and is expected to generate cash flows of
$200,000 annually for 8 years. The discount rate is 9%. What is the NPV of the investment?

**Solution:**

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + ... + CF / (1 + r)^8] - Initial Investment

= [$200,000 / (1 + 0.09)^1 + $200,000 / (1 + 0.09)^2 + ... + $200,000 / (1 + 0.09)^8] - $1,000,000

= $183,486 + $168,528 + $154,961 + $142,694 + $131,687 + $121,743 + $112,858 + $104,929 - $1,000,000

= $1,020,607 - $1,000,000

= $20,607

### 10. **DCF with Annuity**

**Question:** Calculate the present value of an annuity that pays $75,000 annually for 6 years. The discount rate is
7%.

**Solution:**

PV = CF * [(1 - (1 + r)^(-n)) / r]

= $75,000 * [(1 - (1 + 0.07)^(-6)) / 0.07]

= $75,000 * [4.1002]

= $307,515

### 11. **Discount Rate Calculation**

**Question:** If a company’s cash flow is $120,000 and its present value is $1,000,000, what is the discount rate if
the cash flow is expected to last indefinitely?

**Solution:**

r = CF / PV

= $120,000 / $1,000,000

= 0.12 or 12%

### 12. **Terminal Value with Changing Growth Rates**

**Question:** A company has cash flows of $90,000 in year 5, which is expected to grow at 4% annually
indefinitely. The discount rate is 11%. What is the terminal value at the end of year 5?

**Solution:**

Terminal Value = CF * (1 + g) / (r - g)

= $90,000 * (1 + 0.04) / (0.11 - 0.04)

= $93,600 / 0.07

= $1,337,143

### 13. **DCF with Mixed Cash Flows**

**Question:** Calculate the present value of cash flows of $100,000 in year 1, $150,000 in year 2, and $200,000 in
year 3 with a discount rate of 8%.
**Solution:**

PV = $100,000 / (1 + 0.08)^1 + $150,000 / (1 + 0.08)^2 + $200,000 / (1 + 0.08)^3

= $92,593 + $85,348 + $78,350

= $256,291

### 14. **DCF with Projected Cash Flows**

**Question:** A project requires an initial investment of $750,000 and is expected to generate cash flows of
$200,000 per year for 7 years. The discount rate is 10%. What is the NPV?

**Solution:**

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + ... + CF / (1 + r)^7] - Initial Investment

= [$200,000 / (1 + 0.10)^1 + $200,000 / (1 + 0.10)^2 + ... + $200,000 / (1 + 0.10)^7] - $750,000

= $181,818 + $165

,291 + $149,365 + $135,796 + $123,451 + $112,683 + $103,348 - $750,000

= $972,702 - $750,000

= $222,702

### 15. **DCF for Increasing Cash Flows**

**Question:** Calculate the present value of cash flows starting at $50,000 in year 1 and increasing by $10,000
each year for 5 years with a discount rate of 6%.

**Solution:**

PV = $50,000 / (1 + 0.06)^1 + $60,000 / (1 + 0.06)^2 + $70,000 / (1 + 0.06)^3 + $80,000 / (1 + 0.06)^4 + $90,000 /

(1 + 0.06)^5

= $47,170 + $44,580 + $42,151 + $39,869 + $37,730

= $211,550
### 16. **Discounted Cash Flow with Multiple Projects**

**Question:** Two projects require investments of $300,000 and $500,000 respectively. Project A is expected to
generate cash flows of $100,000 per year for 5 years. Project B is expected to generate cash flows of $200,000 per
year for 5 years. The discount rate is 12%. What is the NPV for each project?

**Solution:**

Project A:

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + ... + CF / (1 + r)^5] - Initial Investment

= [$100,000 / (1 + 0.12)^1 + $100,000 / (1 + 0.12)^2 + $100,000 / (1 + 0.12)^3 + $100,000 / (1 + 0.12)^4 +

$100,000 / (1 + 0.12)^5] - $300,000

= $89,286 + $79,531 + $71,370 + $63,919 + $57,120 - $300,000

= $361,226 - $300,000

= $61,226

Project B:

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + ... + CF / (1 + r)^5] - Initial Investment

= [$200,000 / (1 + 0.12)^1 + $200,000 / (1 + 0.12)^2 + $200,000 / (1 + 0.12)^3 + $200,000 / (1 + 0.12)^4 +

$200,000 / (1 + 0.12)^5] - $500,000

= $178,572 + $159,063 + $141,428 + $126,056 + $112,976 - $500,000

= $717,095 - $500,000

= $217,095

### 17. **DCF with Different Cash Flow Patterns**

**Question:** Calculate the present value of cash flows for the next 3 years with $80,000 in year 1, $120,000 in
year 2, and $160,000 in year 3 with a discount rate of 9%.

**Solution:**
PV = $80,000 / (1 + 0.09)^1 + $120,000 / (1 + 0.09)^2 + $160,000 / (1 + 0.09)^3

= $73,398 + $67,062 + $61,575

= $202,035

### 18. **DCF for a Growing Annuity**

**Question:** A company expects cash flows to grow at a rate of 5% annually, starting at $70,000. The discount
rate is 12%. What is the present value of these cash flows over 6 years?

**Solution:**

PV = CF * [(1 - (1 + g)^(-n) / (1 + r)^(-n)) / (r - g)]

= $70,000 * [(1 - (1 + 0.05)^(-6)) / (0.12 - 0.05)]

= $70,000 * [4.2378]

= $299,646

### 19. **Calculating DCF with Mixed Periods**

**Question:** If a company has cash flows of $90,000 in year 1, $120,000 in year 2, and $150,000 in year 3, with a
discount rate of 10%, what is the present value of these cash flows?

**Solution:**

PV = $90,000 / (1 + 0.10)^1 + $120,000 / (1 + 0.10)^2 + $150,000 / (1 + 0.10)^3

= $81,818 + $73,442 + $68,067

= $223,327

### 20. **Terminal Value with Variable Growth Rate**

**Question:** A company is expected to grow its cash flows at 4% annually after year 5. If the cash flow in year 5
is $110,000 and the discount rate is 9%, what is the terminal value at the end of year 5?
**Solution:**

Terminal Value = CF * (1 + g) / (r - g)

= $110,000 * (1 + 0.04) / (0.09 - 0.04)

= $114,400 / 0.05

= $2,288,000

### 21. **DCF with Initial and Terminal Cash Flows**

**Question:** A project has an initial investment of $400,000 and will generate cash flows of $100,000 annually for
4 years. After year 4, a terminal value of $500,000 is expected. The discount rate is 8%. What is the NPV?

**Solution:**

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + CF / (1 + r)^3 + CF / (1 + r)^4] + [Terminal Value / (1 + r)^4] - Initial
Investment

= [$100,000 / (1 + 0.08)^1 + $100,000 / (1 + 0.08)^2 + $100,000 / (1 + 0.08)^3 + $100,000 / (1 + 0.08)^4] +

[$500,000 / (1 + 0.08)^4] - $400,000

= $92,593 + $85,256 + $78,269 + $72,014 + $369,344 - $400,000

= $697,476 - $400,000

= $297,476

### 22. **DCF with Changing Discount Rates**

**Question:** Calculate the present value of cash flows of $150,000, $200,000, and $250,000 for years 1, 2, and 3
respectively with discount rates of 10%, 12%, and 14% respectively.

**Solution:**

PV = $150,000 / (1 + 0.10)^1 + $200,000 / (1 + 0.12)^2 + $250,000 / (1 + 0.14)^3

= $136,364 + $159,691 + $154,419

= $450,474
### 23. **Calculating NPV with Perpetuity**

**Question:** A company is expected to generate a cash flow of $180,000 per year indefinitely, starting from the
end of year 5. The discount rate is 11%. What is the present value of this perpetuity?

**Solution:**

Perpetuity Value at Year 5 = CF / r

= $180,000 / 0.11

= $1,636,364

Present Value = Perpetuity Value / (1 + r)^5

= $1,636,364 / (1 + 0.11)^5

= $1,036,744

### 24. **DCF with Adjusted Discount Rate**

**Question:** A project requires an investment of $600,000 and will generate cash flows of $150,000 per year for 6
years. The discount rate is 9%. What is the NPV?

**Solution:**

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + ... + CF / (1 + r)^6] - Initial Investment

= [$150,000 / (1 + 0.09)^1 + $150,000 / (1 + 0.09)^2 + $150,000 / (1 + 0.09)^3 + $150,000 / (1 + 0.09)^4 +

$150,000 / (1 + 0.09)^5 + $150,000 / (1 + 0.09)^6] - $600,000

= $137,615 + $126,420 + $116,757 + $107,799 + $99,812 + $92,571 - $600,000

= $680,974 - $600,000

= $80,974

### 25. **Calculating DCF with Specific Growth Rate**

**Question:** If a company has cash flows of $130,000 in year 1, growing at 6% annually, with a discount rate of
11%, what is the present

value of these cash flows for 5 years?

**Solution:**

PV = CF * [(1 - (1 + g)^(-n)) / (r - g)]

= $130,000 * [(1 - (1 + 0.06)^(-5)) / (0.11 - 0.06)]

= $130,000 * [4.3295]

= $563,835

### 26. **DCF with Decreasing Cash Flows**

**Question:** Calculate the present value of cash flows decreasing from $70,000 in year 1 to $40,000 in year 4 with
a discount rate of 7%.

**Solution:**

PV = $70,000 / (1 + 0.07)^1 + $60,000 / (1 + 0.07)^2 + $50,000 / (1 + 0.07)^3 + $40,000 / (1 + 0.07)^4

= $65,420 + $61,094 + $56,858 + $52,795

= $236,167

### 27. **Calculating NPV with Immediate Perpetuity**

**Question:** A company is expected to pay $75,000 annually indefinitely starting immediately. If the discount rate
is 8%, what is the present value of this perpetuity?

**Solution:**

Perpetuity Value = CF / r
= $75,000 / 0.08

= $937,500

### 28. **DCF with Initial and Final Cash Flows**

**Question:** A project requires an initial investment of $800,000 and is expected to generate cash flows of
$250,000 annually for 3 years, followed by a terminal value of $600,000. The discount rate is 10%. What is the
NPV?

**Solution:**

NPV = [CF / (1 + r)^1 + CF / (1 + r)^2 + CF / (1 + r)^3] + [Terminal Value / (1 + r)^3] - Initial Investment

= [$250,000 / (1 + 0.10)^1 + $250,000 / (1 + 0.10)^2 + $250,000 / (1 + 0.10)^3] + [$600,000 / (1 + 0.10)^3] -

$800,000

= $227,273 + $206,579 + $187,789 + $450,661 - $800,000

= $1,072,302 - $800,000

= $272,302

### 29. **Discounted Cash Flow for High Discount Rates**

**Question:** Calculate the present value of cash flows of $180,000, $160,000, and $140,000 for the next 3 years
with a discount rate of 15%.

**Solution:**

PV = $180,000 / (1 + 0.15)^1 + $160,000 / (1 + 0.15)^2 + $140,000 / (1 + 0.15)^3

= $156,522 + $136,586 + $118,274

= $411,382

### 30. **DCF with Changing Cash Flows and Terminal Value**
**Question:** If a company expects cash flows of $90,000 in year 1, $100,000 in year 2, $110,000 in year 3, and a
terminal value of $500,000 in year 3, with a discount rate of 10%, what is the NPV?

**Solution:**

NPV = [$90,000 / (1 + 0.10)^1 + $100,000 / (1 + 0.10)^2 + $110,000 / (1 + 0.10)^3] + [$500,000 / (1 + 0.10)^3]

= $81,818 + $73,438 + $66,717 + $375,092

= $597,065

### 31. **Calculating Present Value of Increasing Perpetuity**

**Question:** A company is expected to increase its cash flows by $20,000 each year indefinitely, starting with
$60,000. The discount rate is 12%. What is the present value?

**Solution:**

Present Value = CF / (r - g)

= $60,000 / (0.12 - 0.04)

= $60,000 / 0.08

= $750,000

### 32. **DCF with Non-Uniform Discount Rates**

**Question:** A company has cash flows of $80,000 in year 1, $100,000 in year 2, and $120,000 in year 3. The
discount rates are 8%, 9%, and 10% respectively. What is the present value?

**Solution:**

PV = $80,000 / (1 + 0.08)^1 + $100,000 / (1 + 0.09)^2 + $120,000 / (1 + 0.10)^3

= $74,074 + $84,387 + $90,026

= $248,487
### 33. **DCF for Variable Discount Rates**

**Question:** Calculate the present value of a cash flow of $250,000 in year 1 with a discount rate of 5%, and
$300,000 in year 2 with a discount rate of 7%.

**Solution:**

PV = $250,000 / (1 + 0.05)^1 + $300,000 / (1 + 0.07)^2

= $238,095 + $262,377

= $500,472

### 34. **Terminal Value with Different Growth Rates**

**Question:** A company’s cash flow in year 4 is $90,000 and is expected to grow at 3% per year indefinitely. If
the discount rate is 10%, what is the terminal value at the end of year 4?

**Solution:**

Terminal Value = CF * (1 + g) / (r - g)

= $90,000 * (1 + 0.03) / (0.10 - 0.03)

= $92,700 / 0.07

= $1,328,571

### 35. **Calculating NPV with Variable Cash Flows**

**Question:** Calculate the NPV of cash flows of $50,000, $70,000, $90,000, and $110,000 over 4 years with a
discount rate of 8%.

**Solution:**

NPV = $50,000 / (1 + 0.08)^1 + $70,000 / (1 + 0.08)^2 + $90,000 / (1 + 0.08)^3 + $110,000 / (1 + 0.08)^4

= $46,296 + $42,533 + $39,030 + $35,794

= $163,653

### 36. **DCF with Immediate and Future Perpetuity**

**Question:** A company is expected to pay $90,000 annually indefinitely starting at the end of year 1. If the
discount rate is 11%, what is the present value of this perpetuity?

**Solution:**

Perpetuity Value = CF / r

= $90,000 / 0.11

= $818,182

### 37. **DCF with Multiple Discount Rates**

**Question:** Calculate the present value of cash flows of $120,000, $140,000, and $160,000 for years 1, 2, and 3
with discount rates of 7%, 8%, and 9% respectively.

**Solution:**

PV = $120,000 / (1 + 0.07)^1 + $140,000 / (1 + 0.08)^2 + $160,000 / (1 + 0.09)^3

= $112,155 + $119,305 + $122,727

= $354,187

### 38. **DCF with Adjusted Terminal Value**

**Question:** A company is expected to have cash flows of $200,000 in year 5, and then grow at 5% per year
indefinitely. If the discount rate is 10%, what is the terminal value at the end of year 5?

**Solution:**

Terminal Value = CF * (1 + g) / (r - g)
= $200,000 * (1 + 0.05) / (0.10 - 0.05)

= $210,000 / 0.05

= $4,200,000

### 39. **Calculating Present Value of Cash Flows with Mixed Periods**

**Question:** A project will have cash flows of $70,000 in year 1, $80,000 in year 2, $90,000 in year 3, and
$100,000 in year 4. The discount rate is 9%. What is the present value?

**Solution:**

PV = $70,000 / (1 + 0.09)^1 + $80,000 / (1 + 0.09)^2 + $90,000 / (1 + 0.09)^3 + $100,000 / (1 + 0.09)^4

= $64,220 + $59,370 + $54,817 + $50,506

= $228,913

### 40. **DCF with Changing Growth Rates**

**Question:** A company’s cash flow is expected to grow at 5% for the first 3 years, and

then at 3% indefinitely. If the initial cash flow is $120,000 and the discount rate is 9%, what is the present value?

**Solution:**

PV = [CF * [(1 - (1 + g1)^(-n)) / (r - g1)]] + [Terminal Value / (1 + r)^n]

= [$120,000 * (1 - (1 + 0.05)^(-3)) / (0.09 - 0.05)] + [$120,000 * (1 + 0.05)^3 * (1 + 0.03) / (0.09 - 0.03)] / (1 +

0.09)^3

= [$120,000 * 2.6730] + [$144,535 / 1.2950]

= $320,760 + $111,905

= $432,665