You are offered an investment with returns of $ 1,857 in year 1, $ 3,732 in...

You are offered an investment with returns of $ 1,857 in year 1, $ 3,732 in year 2, and $ 4,485 in year 3. The investment will cost you $ 8,615 today. If the appropriate Cost of Capital (quoted interest rate) is 12.5 %, what is the Net present Value of the investment? Enter your answer to the nearest $.01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

Expert Solution

Net present Value of the investment is $-865.63
Statement showing Cash flows
Particulars	Time	PVf 12.5%	Amount	PV
Cash Outflows	-	1.00	(8,615.00)	(8,615.00)
PV of Cash outflows = PVCO				(8,615.00)
Cash inflows	1.00	0.8889	1,857.00	1,650.67
Cash inflows	2.00	0.7901	3,732.00	2,948.74
Cash inflows	3.00	0.7023	4,485.00	3,149.96
PV of Cash Inflows =PVCI				7,749.37
NPV= PVCI - PVCO				(865.63)

jeff jeffy answered 1 year ago

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