A farmer sows a certain crop. It costs $250,000 to buy the seed, prepare the ground,...
A farmer sows a certain crop. It costs $250,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it will cost $95,000 to harvest the crop. If the crop will be worth $350,000, and the interest rate is 10%, what is the net present value (NPV) of this investment? Select one: A. $240,000 B. $567,103 C. $18,181 D. $87,103
Homework Answers
NPV = present value of cash inflows-present value of cash outflows
Present value (PV)of Cash inflows:
Interest rate =10%
350,000 we will get in one year time
So PV of cash inflows = 350,000*1/1.1=318181
PV of Cash outflows:
250,000 costs at the beginning hence no discounting is required
95,000 will get in one year time hence discounting required
PV of cash outflows = 95000/1.1 = 86363
NPV = 318181-250000-86363
NPV =-18181 (Option C)
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recommended investment strategy, Present an allocation that is
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classes), Syntax (has to sound like an investment policy
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