An investment opportunity requires an initial investment of 25000. If you make t

Question

An investment opportunity requires an initial investment of 25000. If you make this investment today, you will receive a cash flow of 8000 at the end of each of the next five years. Assuming you require a return of 14% on this investment, what is it’s net present value?
Q11. An investment opportunity requires an initial investment of $25,000. If you make this investment today, you will receive a cash flow of $8,000 at the end of each of the next five years. Assuming you require a return of 14% on this investment, what is its net present value? A. $ 9,596.68 B. 3,746.72 C. +$ 2,464.65 D. +$ 3,746.72 E. +$27,880.83

Explanation / Answer

Q 11 : Answer: C. + $ 2,464.65

Workings:

Year Cash Flows PV factor at 14 % discount rate Present Values 0 (25,000) 1.00000 $ ( 25,000) 1 8,000 0.87719 7,017.52 2 8,000 0.76947 6,155.76 3 8,000 0.67497 5,399.76 4 8,000 0.59208 4,736.64 5 8,000 0.51937 4,154.96 NPV $ 2,464.65

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