An investment opportunity has cash flows of $1,000, $3,000, and $9,000 in 1, 2, and 3 years, respectively. If your relevant interest rate is 15%, what is the maximum amount you would be willing to invest today?
Ans $ 9055.64
Year | Project Cash Flows (i) | DF@ 15% | DF@ 15% (ii) | PV of Project ( (i) * (ii) ) |
1 | 1000 | 1/((1+15%)^1) | 0.870 | 869.57 |
2 | 3000 | 1/((1+15%)^2) | 0.756 | 2,268.43 |
3 | 9000 | 1/((1+15%)^3) | 0.658 | 5,917.65 |
PV | 9,055.64 |
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