You have an opportunity to invest $ 49,600 now in return for $ 60,100 in one...

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You have an opportunity to invest $ 49,600 now in return for $ 60,100 in one...

You have an opportunity to invest $ 49,600 now in return for $ 60,100 in one year. If your cost of capital is 7.9 %, what is the NPV of this investment?

The NPV will be $___. (Round to the nearest cent.)

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Answer 1

Answer #1

Net Present Value (NPV) of the Investment

Net Present Value (NPV) of the Investment = Present Value of annual cash flow – Initial Investment Cost

= CF1/(1 + r)¹ – Initial Investment Cost

= $60,100/(1 + 0.0790)¹ – $49,600

= [$60,100 / 1.0790] - $49,600

= $55,699.72 - $49,600

= $6,099.72

“Hence, the Net Present Value (NPV) of the Investment will be $6,099.72”

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Answer 2

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