A business promises to pay the investor of $6000 today for a payment of $1500 in one year's time, $3000 in two years' time, and

Question

4 years ago

14

$3000 in three years' time. What is the present value of this business opportunity if the interest rate is 6% per year

2 answers:

barxatty [35] · Answer 1 · 2021-11-30T02:34:37+03:00

Answer:

NPV= 603.94

Explanation:

Giving the following information:

A business promises to pay the investor of $6000 today for a payment of $1500 in one year, $3000 in two years, and $3000 in three years.

We need to calculate the net present value using the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf= cash flow

For example:

Year 2= 3,000/1.06^2= $2,669.99

NPV= 603.94

White raven [17] · Answer 2 · 2021-11-30T04:36:06+03:00

3 0

Answer:

The business sounds good as the net present value is positive.

NPV $603.94

Explanation:

we have to solve for the present value of the discount values of the cash flow:

$PV = \frac{1500}{1+0.06} + \frac{3000}{(1+0.06)^2} +\frac{3000}{(1+0.06)^3}$

PV = 6603.941509

Net present value

6,603.94 - 6,000 investment (amount borrowed to the business)

603.94