Question
In: Finance
Drongo Corporation is considering an investment with a payback of five years and a cost of...
Drongo Corporation is considering an investment with a payback of five years and a cost of $12000. If the required return is 8%, what is the worst-case NPV? Explain. Show working out.
eg, NPV = cost/(1 + required return)t – cost
Solutions
Expert Solution
In worst case, total cost will be receoverd in 5th year in the given scenario
r = required return = 8%
t = 5 years
NPV = Cost / (1+r)^t - Cost
= [$12,000 /.(1+8%)^5] - $12,000
= [$12,000 / 1.46932808] - $12,000
= $8,166.99835 - $12,000
= -$3,833.00165
Therefore, Worst case NPV is -$3,833
jeff jeffy answered 3 years agoRelated Solutions
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