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%.

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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 1 year ago

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