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Mitchell Investments has offered you an investment opportunity. If you invest $30,000 today you will receive...

Mitchell Investments has offered you an investment opportunity. If you invest $30,000 today you will receive the following cash-flows:
*$6,000 each year from years 1 through 5
*$3,000 each year from years 6 through 10
*$2,000 each year from years 11 through 20
If you required a 9% return on your investments, would this be a good investment opportunity? Show your work and justify your answer.

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Expert Solution

The investment is giving +Ve NPV hence it is agood oppurtunity

Year Cash Flow PVF/PVAF @ 9% PV of Cash Flows
1 to 5 $ 6,000.00                     3.8897 $            23,337.91
6 to 10 $ 3,000.00                     2.5280 $              7,584.02
11 to 20 $ 2,000.00                     2.7109 $              5,421.80
PV of Cash Inflows $            36,343.73
PV of Cash Outflows $            30,000.00
NPV $              6,343.73

jeff jeffy answered 1 year ago
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