Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. timothy is considering an investment of $10,000. t

Timothy is considering an investment of $10,000. This investment is supposedly going to provide him with...

Free

80.2K

Verified Solution

Question

Finance

Timothy is considering an investment of $10,000. This investmentis supposedly going to provide him with cash inflows of $2,500 inthe first year and $6,000 a year for the following 2 years. At adiscount rate of zero percent this investment has a net presentvalue (NPV) of _____, but at the relevant discount rate of 18percent the project's NPV is: a. $4,500; $62.03. b. -$1,500;$62.03. c. $4,500; $79.54. d. -$1,500; $79.54. e. $6,000;$98.48.

Answer & Explanation Solved by verified expert
4.0 Ratings (434 Votes)

At 0% discount NPV = -10,000 + 2500 + 6000 + 6000 = 4500

Discount rate 18.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
           (10,000.000) 0                           (10,000.00)                       (10,000.00)
               2,500.000 1                               2,118.64                          (7,881.36)
               6,000.000 2                               4,309.11                       (3,572.249)
               6,000.000 3                               3,651.79

                               79.536
NPV = 79.54

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Timothy is considering an investment of $10,000. This investmentis supposedly going to provide him with cash inflows of $2,500 inthe first year and $6,000 a year for the following 2 years. At adiscount rate of zero percent this investment has a net presentvalue (NPV) of _____, but at the relevant discount rate of 18percent the project's NPV is: a. $4,500; $62.03. b. -$1,500;$62.03. c. $4,500; $79.54. d. -$1,500; $79.54. e. $6,000;$98.48.

Other questions asked by students

Q

on Find the average rate of change of f x x 2 x or the...

Basic Math
Q

Working capital cash flow.??Tires for Less is a franchise of tire stores throughout the greater Northwest....

Finance
Q

a b d What is the area of this figure area Figure is not to...

Basic Math
Q

tom of equations graphically If the syst

Basic Math
Q

For the point (1,3?/4) in polar coordinates, (a) plot the point, (b) give two other...

Basic Math
Q

Researchers wanted to determine if there was an association between the level of satisfaction of...

Statistics
Q

Here are summary statistics for randomly selected weights of newborn girls n 36 x 3216...

Statistics
Q

what 2 numbers add to 15 and multiplies to 225

Algebra
Q

Cornick, Inc. sells office products to businesses in the eastern region of the United States....

Accounting
Q

Trevino Company manufactures two models of its driver golf clubs, the Pro and the Master....

Accounting
Q

Morgan enterprises is doing inventory. Morgan inadvertently miscategorized a $14,000 shipment of FOB shipping point...

Accounting
Q

Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX,...

Accounting