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Which one of the following would have the greatest net present value?

a. $1,000 today plus $200 a month for a year
b. $2,200 today plus $200 a month for six months
c. $1,000 today plus $100 a month for 2 years
d. $1,000 today plus $400 a month for six months
e. $2,200 today plus $100 a month for a year

User TheBAST
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1 Answer

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Final answer:

The option with the greatest net present value is d. $1,000 today plus $400 a month for six months.

Step-by-step explanation:

The net present value (NPV) is a financial measure that calculates the value of an investment by discounting all future cash flows to their present value. In order to determine which option has the greatest NPV, we need to consider the present value of each option's cash flows.

Out of the given options, the option with the greatest net present value is d. $1,000 today plus $400 a month for six months. By calculating the present value of both the initial investment and the monthly cash flows, we can determine that this option has the highest net present value among all.

User Shuvankar Paul
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