Question: Task # 1 Using the NPV equation, derive partial derivatives of NPV with respect to each key variable: net cash flow, discount rate, and time.

Task #

1

Using the NPV equation, derive partial derivatives of NPV with respect to each key variable: net cash flow, discount rate, and time. State a key observation for each calculation.

If the base case discount rate is

5 %,

estimate the NPV impact if interest rates increase the discount rate to

7 % .

Assume the total time period for the asset is

20

years.

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