Question

You have been offered a unique investment opportunity. If you invest  $8,100 today, you will receive  $405 one year from now,  $1,215 two years from now, and $8,100 ten years from now.

What is the NPV of the opportunity if the cost of capital is 1.2% per year?

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS NPV = $675.74

Given that:

Cost of Capital = 1.2%

Cashflow timeline:

Time	Amount
0	-$8,100.00
1	$405.00
2	$1,215.00
10	$8,100.00

NPV ANALYSIS:

Time	Amount	PVF	PV
0	-$8,100.00	1.000000	-$8,100.00
1	$405.00	0.988142	$400.20
2	$1,215.00	0.976425	$1,186.36
10	$8,100.00	0.887554	$7,189.19
NPV			$675.74

I hope this solves your doubt.

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