You have the opportunity to invest in a new venture, but first you want to weigh

Question

You have the opportunity to invest in a new venture, but first you want to weigh your risk. If you invest $15,000 on January 1, 2012, it is possible you will receive the following net amounts:
January 1, 2013 -$1,000
January 1, 2014 - $1,000
July 1, 2014 - $2,500
July 1, 2015 - $10,000
January 1, 2017 - $350,000
While this opportunity looks good, you also decide to look into another option. By investing in the stock market you believe you could get a return of about 7% per year on average over 14 years. However, the first investment should provide a return of 3 times what you

Explanation / Answer

NPV = NPV(Rate,CF1...CF5) + CF0 As First Investment reyurn is 3 tims of Stock makt return = 3*7% = 21% So Rate = 21% So NPV of First Inv = NPV(21%,1000,1000,2500,10000,350000)-15000 = $127,526 .Ans(a) IRR = IRR(CFs) = IRR(-15000,1000,1000,2500,10000,350000) = 92.80%

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