Sam Weller is thinking of investing $70,000 to start a bookstore. Sam plans to withdraw $15,000 from the business at the end of

Question

3 years ago

13

Sam Weller is thinking of investing $70,000 to start a bookstore. Sam plans to withdraw $15,000 from the business at the end of

each year for the next five years. At the end of the fifth year, Sam plans to sell the business for $110,000 cash. At a 12% discount rate, what is the net present value of the investment?A. $54,075B. $62,370C. $46,445D. $70,000

Business

1 answer:

Norma-Jean [14] · Answer 1 · 2022-05-01T00:28:56+03:00

Answer:

C. $46,445

Explanation:

The net present value is the value of the after tax cash flows when the amount invested is substracted from it.

Using the financial calculator to find the NPV:

Cash flow for year zero =$ -70,000

Cash flow for each year from year 1 - 4= $15,000

Cash flow for year 5 = $125,000

I = 12 %

NPV = $46,445

I hope my answer helps you.