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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