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You have an opportunity to invest $ 49 900 now in return for $ 60 600...

You have an opportunity to invest $ 49 900 now in return for $ 60 600 in one year. If your cost of capital is 8.3 %, what is the NPV of this investment?

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Answer #1

NPV (net present value) of investment is net of present value of cash flows. it is calculated by following formula

NPV = Cash flows/(1+i)^n
Initial investment= -49900

(outflow wll be negatuve)

Return in one year=

 60600

(inflows will be positive)
Cost of capital (i)=

8.3 % or 0.083

NPV of investment = - 49900 /(1+0.083)^0 + ( 60600/(1+0.083)^1)
6055.67867

So, NPV of investment is $6055.68.
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