Question
In: Finance
You are considering investing in a very risky new venture. The owner wants you to invest...
You are considering investing in a very risky new venture. The owner wants you to invest $150,000 today, and has promised that you will receive $1,000,000 in 10 years. Because of the high risk of this investment, your required rate of return is 20%. What is the Net Present Value of this investment?
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Expert Solution
| Calculation of NPV: | |||
| Time | Cashflow | PVF @20% | PV |
| - | -1,50,000 | 1.00 | -1,50,000.00 |
| 1.00 | - | 0.8333 | - |
| 2.00 | - | 0.6944 | - |
| 3.00 | - | 0.5787 | - |
| 4.00 | - | 0.4823 | - |
| 5.00 | - | 0.4019 | - |
| 6.00 | - | 0.3349 | - |
| 7.00 | - | 0.2791 | - |
| 8.00 | - | 0.2326 | - |
| 9.00 | - | 0.1938 | - |
| 10.00 | 10,00,000 | 0.1615 | 1,61,505.58 |
| 11,505.58 | |||
| Net Present Value is $11505.58 | |||
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