The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows...
The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $40,000 per year in Years 1 through 4, and $132,000 in Year 5. This investment will cost the firm $150,000 today, and the firm's cost of capital is 16 percent. What is the NPV for this investment? Round it to a whole dollar.
Homework Answers
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=40,000/1.16+40,000/1.16^2+40,000/1.16^3+40,000/1.16^4+132,000/1.16^5
=$174,774.14
NPV=Present value of inflows-Present value of outflows
=$174,774.14-$150,000
=$24,774(Approx).
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