An investment requires $16,000 today, and produces the first cash flow of $800 in two years (year 2). Cash flow is expected to grow at 2% per year after year 2. a) What is the NPV of this investment if the discount rate is 6% ? b) What is the rate of return of this investment?
An investment requires $16,000 today, and produces the first cash flow of $800 in two years (year 2). Cash flow is expected to grow at 2% per year after year 2. a) What is the NPV of this investment if the discount rate is 6% ? b) What is the rate of return of this investment?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 27P
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An investment requires $16,000 today, and produces the first cash flow of $800 in two years (year 2). Cash flow is expected to grow at 2% per year after year 2.
- a) What is the NPV of this investment if the discount rate is 6% ?
- b) What is the rate of
return of this investment ?
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