Marian Plunket owns her own business and is considering an investment. If she un
ID: 1170226 • Letter: M
Question
Marian Plunket owns her own business and is considering an investment. If she undertakes the? investment, it will pay $ 5,120 at the end of each of the next 3 years. The opportunity requires an initial investment of $ 1,280 plus an additional investment at the end of the second year of $ 6,400. What is the NPV of this opportunity if the interest rate is 2.4 % per? year? Should Marian take? it?
What is the NPV of this opportunity if the interest rate is 2.4 % per? year?
The NPV of this opportunity is ?$ (Round to the nearest? cent.)
Should Marian take? it?
Marian take this opportunity.?
Explanation / Answer
Solution :- A B C D=C-B E F=D*E Years Cash outflow Cash inflow Net cash flow PVF-@2.4% PV of cash flow 0 $1,280 $0 -$1,280 1 -$1,280.00 1 $5,120 $5,120 0.9765625 $5,000.00 2 $6,400 $5,120 -$1,280 0.953674316 -$1,220.70 3 $5,120 $5,120 0.931322575 $4,768.37 NPV $7,267.67 Note:- NPV of projcet is calculated as follows =PV of inflows-PV of outflows i) The NPV os this opportunity is = $7267.67 II) Since the NPV of this project is positive , hence he should take this opportunity. Please feel free to ask if you have any query in the comment section.