Question

Suppose that an investment opportunity has a cost today of $100,000. You will receive a payment of $30,000 one year from today. You will receive a payment of $60,000 two years from today. You will receive a payment of $50,000 three years from today. Finally, you will have to pay $10,000 to dispose of the asset four years from today. What is the net present value of the costs and benefits if the interest rate is 10%?

Answer #1

You are offered a four-year investment opportunity costing
$100,000 today. The investment will pay $25,000 in the first year,
$27,000 in the second year, $30,000 in the third year, and $40,000
in the fourth year. Investments of comparable risk require a 10%
rate of return in the financial market. Should you accept the
investment opportunity and why?
A.
Yes, those cash payments look good to me because they add up to
$122,000.
B.
Yes, because the investment’s cash payments represent...

You want to receive $50,000 five years from today and a
retirement annuity of $100,000 per year for 25 years with the first
payment 10 years from today. To pay for this, you will make 5
payments of A per year beginning today and 10 annual payments of A
with the first payment 8 years from today. With an interest rate of
8%, what is the value for A?

Suppose you have an investment opportunity that costs
you $130,000 today and will yield payoffs of $50,000 at the end of
the 2nd year, 3rd year, and 4th year. Will you invest your $130,000
on this investment opportunity today if the interest rate is 10%?
Your answers should include the calculations as well as the final
answer. Video Problem Walk-Through: Computing the Present Value of
a Firm's Investment Project in ch 27 will show you step-by-step

Clair Dunphy will receive a confirmed future payoff from an
investment that she made in a business in Ireland. It will pay
Clair €10,000 one year from today, €20,000 two years from today,
and €30,000 three years from today. The interest rate is 5% per
year.
A. What is today’s present value of Clair’s investment
payoffs?
B. What is the future value of Clair’s investment payoffs
exactly three years from today (on date of last payment)?

An investment opportunity has an initial cost of $1000 today. In
the next year, you will get $1050. The discount rate is 10%. What
is the net present value of that investment opportunity?
Now, if the discount rate is 5%, what is the net present value
of that investment opportunity?
Now, if the discount rate is 4%, what is the net present value
of that investment opportunity?

You are trying to value the following investment opportunity:
The investment will cost you $23,670 today. In exchange for your
investment you will receive monthly cash payments of $5,050 for 9
months. The first payment will occur at the end of the first month.
The applicable effective annual interest rate for this investment
opportunity is 7%. Calculate the NPV of this investment
opportunity. Round to two decimals (do not include the $-sign in
your answer).

You are considering an investment opportunity that requires an
investment of $1,000,000 today and will provide $600,000 one year
from now, $400,000 two years from now, and $500,000 three years
from now. If the appropriate interest rate is 10%, then the NPV of
this opportunity is closest to: ($38,000) $118,630 $251,690
$318,980

You have been offered a unique investment opportunity. If you
invest
$11,700 ?today, you will receive $585 one year from? now, $1,755
two years from? now, and $11,700 ten years from now.
a. What is the NPV of the opportunity if the
cost of capital is 6.7 % per? year? Should you take the?
opportunity?
b. What is the NPV of the opportunity if the
cost of capital is 2.7 %per? year? Should you take it? now?

You have been offered a unique investment opportunity. If you
invest 13,000 today, you will receive $650 one year from now, $1950
two years from now, and $13000 ten years from now. a. What is the
NPV of the opportunity if the cost of capital is 7.1% per year?
Dhould you take the opportunity? b. What is the NPV of the
opportunity if the cost of the capital is 3.1% per year? Should you
take it now?

You have been offered a unique investment opportunity. If you
invest
$11,800
?today, you will receive $590
one year from? now, $1,770
two years from? now, and $11,800 ten years from now.
a. What is the NPV of the opportunity if the
cost of capital is
5.8 % per? year? Should you take the? opportunity?
b. What is the NPV of the opportunity if the
cost of capital is
1.8 %1.8%
per? year? Should you take it? now?

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