The value of the second $1,000 payment is worth $ 952.38
The net present value is given by the expression as shown below:
Plugging the values in the above expression,
Future value =$1,000
r=0.05
n=1
The value of the second $1,000 payment is worth $ 952.38
<h3>What Is Net Present Value (NPV)?</h3>Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project. NPV is the result of calculations used to find today’s value of a future stream of payments.
Net Present Value (NPV) Formula:
where:
=Net cash inflow-outflows during a single period
i =Discount rate or return that could be earned in alternative investments.
t=Number of timer periods
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