Question
In: Finance
Consider an investment that costs $100,000 and has a cash inflow of $25,000 every year for...
Consider an investment that costs $100,000 and has a cash inflow of $25,000 every year for 5 years. The required return is 9%. What is the net present value of this investment?
A) $ -2,758.72
B) $ -857.65
C) $1217.70
D) $10,525
E) $25,000
Solutions
Expert Solution
| net present value of this investment - A) $ -2,758.72 | ||||
| Statement showing Cash flows | ||||
| Particulars | Time | PVf 9% | Amount | PV |
| Cash Outflows | - | 1.00 | (100,000.00) | (100,000.00) |
| PV of Cash outflows = PVCO | (100,000.00) | |||
| Cash inflows | 1.00 | 0.9174 | 25,000.00 | 22,935.78 |
| Cash inflows | 2.00 | 0.8417 | 25,000.00 | 21,042.00 |
| Cash inflows | 3.00 | 0.7722 | 25,000.00 | 19,304.59 |
| Cash inflows | 4.00 | 0.7084 | 25,000.00 | 17,710.63 |
| Cash inflows | 5.00 | 0.6499 | 25,000.00 | 16,248.28 |
| PV of Cash Inflows =PVCI | 97,241.28 | |||
| NPV= PVCI - PVCO | (2,758.72) | |||
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