Question

A firm has an opportunity to invest $95,000 today that will yield $109,250 in one year. If interest rates are 4%, what is the net present value (NPV) of this investment?A) $16,077B) $11,053C) $10,048D) $14,250

Answer 1

The net present value (NPV) of this investment is C) $10,048

Step-by-step explanation:

Net present value (NPV) is the value of the future cash flows over the entire life of an investment discounted to the present.

The firm invests $95,000 today that will yield $109,250 in one year. The interest rates of the investment are 4%. The net present value (NPV) of this investment:

NPV = $109,250/(1+4%) - $95,000 = $10,048

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