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A business promises to pay the investor of $6000 today for a payment of $1500 in one year's time, $3000 in two years' time, and $3000 in three years' time. What is the present value of this business opportunity if the interest rate is 6% per year

Respuesta :

facundobuzzetti

Answer:

NPV= 603.94

Explanation:

Giving the following information:

A business promises to pay the investor of $6000 today for a payment of $1500 in one year, $3000 in two years, and $3000 in three years.

We need to calculate the net present value using the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf= cash flow

For example:

Year 2= 3,000/1.06^2= $2,669.99

NPV= 603.94

TomShelby

Answer:

The business sounds good as the net present value is positive.

NPV $603.94

Explanation:

we have to solve for the present value of the discount values of the cash flow:

[tex]PV = \frac{1500}{1+0.06} + \frac{3000}{(1+0.06)^2} +\frac{3000}{(1+0.06)^3}[/tex]

PV = 6603.941509

Net present value

6,603.94 - 6,000 investment (amount borrowed to the business)

603.94

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