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Assume an investment has cash flows of −$39,700, $22,750, $14,500, and $15,300 for Years 0 to...

Assume an investment has cash flows of −$39,700, $22,750, $14,500, and $15,300 for Years 0 to 3, respectively. What is the NPV if the required return is 12.9 percent? Multiple Choice $1,519.03 $2,458.20 $1,842.86 $2,283.14 $1,988.12

Expert Solution

NPV is the sum of present value of cash flows.

Year	Cash Flows	Present value factor at 12.9%	Discounted cash flow
0	-$39,700.00	1.00	-$39,700.00
1	$22,750.00	0.8857396	$20,150.58
2	$14,500.00	0.7845346	$11,375.75
3	$15,300.00	0.6948934	$10,631.87
		NPV =	$2,458.20

Excel formulas used:

Present value factor without using excel:

Where,
i = rate of return
n = number of periods

For year 1:

For year 2:

For year 3:

jeff jeffy answered 1 year ago

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