Question
In: Finance
An investor invests $500. The investment pays $100 at the end of year 2, $200 at...
An investor invests $500. The investment pays $100 at the end of year 2, $200 at the end of year 3 and $300 at the end of year 4.
Calculate the net present value (NPV) of the investment using interest preference rate of 5.7%.
----------------------------------------------
I got
v = 1/1.12
So would it just be NPV = -500 + 100(v)^2 + 200v^3 + 300v^4?
Solutions
Expert Solution
| Computation of NPV | ||||
| i | ii | iii=i*ii | ||
| Year | Cash flow | PVIF @ 5.7% | Present value | |
| 0 | -500 | 1 | $ (500.00) | |
| 1 | 0 | 0.946073794 | $ - | |
| 2 | 100 | 0.895055623 | $ 89.51 | |
| 3 | 200 | 0.846788669 | $ 169.36 | |
| 4 | 300 | 0.801124569 | $ 240.34 | |
| $ (0.80) | ||||
| answer = | $ (0.80) | |||
jeff jeffy answered 2 years agoRelated Solutions
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