Question

You have an opportunity to invest $101,000 now in return for

$79,300 in one year and $29,200 in two years. If your cost of
capital is 9.1%​, what is the NPV of this​ investment?

Answer 1

The NPV of the investment is -$8,525.82.

Step-by-step explanation:

To calculate the NPV (Net Present Value) of an investment, we need to discount the cash flows at the cost of capital. The cost of capital in this case is 9.1%. We have cash flows of $79,300 in one year and $29,200 in two years. To discount these cash flows, we use the formula:

NPV = CF0 + CF1 / (1+r) + CF2 / (1+r)2

Substituting the values, we get:

NPV = -$101,000 + $79,300 / (1+0.091) + $29,200 / (1+0.091)2

Simplifying the formula, we find that the NPV of this investment is -$8,525.82.