The Seattle Corporation has been presented with an investment opportunity which will yield end of year...
The Seattle Corporation has been presented with an investment opportunity which will yield end of year cash flows of $30,000 per year in Years 1 through 4, $35,000 in Year 5 . This investment will cost the firm $100,000 today, and the firm's required rate of return is 10 percent. What is the NPV for this investment?
$32,680
$55,000
$13,720
$16,830
Homework Answers
Your required answer is option D i.e. $16,830
| Year | Cash Flow | Present Value Factor of 10% | Present Value |
| 0 | -100000 | -100000 | |
| 1 | 30000 | 1.1 | 27272.72727 |
| 2 | 30000 | 1.21 | 24793.38843 |
| 3 | 30000 | 1.331 | 22539.44403 |
| 4 | 30000 | 1.4641 | 20490.40366 |
| 5 | 35000 | 1.61051 | 21732.24631 |
| NPV | 16828.21 |
So NPV is 16830 (Approx.)
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