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insens350 [35]
3 years ago
7

Park Co is considering an investment that requires immediate payment of $28.245 and provides expected cash inflows of 59,300 ann

ually for four years. Assume Park Co requires a 7% return on its investments.
What is the net present value of this investment?
Business
1 answer:
statuscvo [17]3 years ago
6 0

Answer:

The net present value of this investment is $3,256.06.

Explanation:

Note: There two errors in the figures provided in this question. They are they therefore fixed before answering this question as follows:

Park Co is considering an investment that requires immediate payment of $28,245 and provides expected cash inflows of $9,300 annually for four years. Assume Park Co requires a 7% return on its investments.

What is the net present value of this investment?

The explanation of the answer is now provided as follows:

The present value (PV) of the annual expected cash inflows of $9,300 can be calculated using the formula for calculating the present value of an ordinary annuity as follows:

PV of the annual expected cash inflows = Annual expected cash inflows * ((1 - (1 / (1 + rate of returns))^number of years) / rate of returns) = $9,300 * ((1 - (1 / (1 + 0.07))^4) / 0.07) = $31,501.06

Net present value = PV of the annual expected cash inflows – Required immediate payment for the investment = $31,501.06 - $28,245 = $3,256.06

Therefore, the net present value of this investment is $3,256.06.

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An investor invests $4,000 to buy 200 shares of Sand Corporation, which has an expected return of 24%; $2,000 to buy 100 shares
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Answer:

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Explanation:

given data

invests $4,000

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and

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to find out

expected return on this portfolio

solution

we know total investment is

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and

Wt. of Sand Corporation shares in the total portfolio= \frac{4000}{10000} =  0.4

Wt. of Water Corporation shares in the total portfolio=\frac{2000}{10000} =  0.2

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Answer:

$70,875

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