Question

An investment opportunity has cash flows of $1,000, $3,000, and $9,000 in 1, 2, and 3...

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?

Homework Answers

Answer #1

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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