Question

9) A firm is evaluating an investment proposal which has an initial investment of $5,000 and cash flows presently valued at $4,000. The net present value of the investment is __________.

Answer 1

-$1,000

Step-by-step explanation:

A firm has an initial investment of $5,000 when evaluating an investment proposal

The cash flow is presently valued at $4,000

Therefore, the net present value can be calculated as follows

Net present value= present value of cash flow-initial investment

= $4,000-$5,000

= -$1,000

Hence the net present value of the investment is -$1,000