Question

You have an opportunity to invest $49,300 now in return for $59,600 in one year, If your cost of capital is 8.4%, what is the NPV of this investment? The NPV will be s (Round to the nearest cent.)

Answer 1

The Net Present Value (NPV) calculates the present value of future cash flows and helps determine the profitability of an investment. In this case, the NPV of this investment is $10,300.

Step-by-step explanation:

The Net Present Value (NPV) calculates the present value of future cash flows and helps determine the profitability of an investment. To calculate the NPV, we need to discount the future cash flows using the cost of capital. In this case, the initial investment is -$49,300 and one year later, we receive $59,600. The NPV is calculated as follows:

NPV = Future Cash Flow / (1 + Cost of Capital)^n - Initial Investment

NPV = $59,600 / (1 + 0.084)^1 - (-$49,300) = $10,300

Therefore, the NPV of this investment is $10,300.