Question

You are trying to value the following investment opportunity: The investment will cost you $24,197 today. In exchange for your investment, you will receive monthly cash payments of $5,014 for 10 months. The first payment will occur at the end of the first month. The applicable effective annual interest rate for this investment opportunity is 8%. Calculate the NPV of this investment opportunity. Round to two decimals (do not include the $-sign in your answer).

Answer 1

Calculation of monthly effective interest rate
Assume monntly rate be r
8% =(1+r)^12 -1
r =0.643403%
Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.00643403^a	d=b*c
0	$   -24,197	1	$         -24,197.00
1	$       5,014	0.993607	$             4,981.95
2	$       5,014	0.987255	$             4,950.10
3	$       5,014	0.980944	$             4,918.45
4	$       5,014	0.974673	$             4,887.01
5	$       5,014	0.968442	$             4,855.77
6	$       5,014	0.96225	$             4,824.72
7	$       5,014	0.956099	$             4,793.88
8	$       5,014	0.949987	$             4,763.23
9	$       5,014	0.943913	$             4,732.78
10	$       5,014	0.937879	$             4,702.53
NPV			$           24,213.41