The annual profit from an investment is $20,000 each year for 5 years and the cost...
The annual profit from an investment is
$20,000
each year for
5
years and the cost of investment is
$80,000
with a salvage value of
$ 45 000
The cost of capital at this risk level is
14%.
Based on the given information, the net present value of the investment =
(round your response to the nearest whole number).
Homework Answers
Answer: NPV= $12,033
Explanation:
| risk level, r | 14% | |||||
| period no, n | 0 | 1 | 2 | 3 | 4 | 5 |
| investment | profit | profit | profit | profit | profit+ salvage value | |
| Cash flow, FV | -$80,000 | $20,000 | $20,000 | $20,000 | $20,000 | $65,000 |
| present value, PV= FV/(1+r)^n | -$80,000.0 | $17,543.9 | $15,389.4 | $13,499.4 | $11,841.6 | $33,759.0 |
| NPV= sum of all PV | $12,033 |
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