B) what is the PV of the investment if the interest rate is 0? ...
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B) what is the PV of the investment if the interest rate is 0?
(Present value of complex cash flows) You have an opportunity to make an investment that will pay $300 at the end of the first year, $100 at the end of the second year, $100 at the end of the third year, $200 at the end of the fourth year, and $200 at the end of the fifth year. a. Find the present value if the interest rate is 12 percent. (Hint You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the = NPV function in Excel or to use your CF key on a financial calculatorbut you'll want to check your calculator's manual before you use this key. Keep in mind that with the = NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present With a financial calculator, you should keep in mind that CF, is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CFO = 0.) b. What would happen to the present value of this stream of cash flows if the interest rate were zero percent? a. What is the present value of the investment if the interest rate is 12 percent? (Round to the nearest cent)
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