Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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![**Compute the NPV statistic for Project Y given the following cash flows and if the appropriate cost of capital is 12 percent.**
**Project Y**
| Time | 0 | 1,000 | 2,000 | 3,000 | 4,000 | 5,000 |
|------|---------|-------|-------|-------|-------|-------|
| Cash Flow | -$10,000 | $3,000 | $4,000 | $1,000 | $2,000 | $500 |
**Multiple Choice**
- ∘ -$1,539.14
- ∘ $18,133.88
- ∘ -$1,866.12
- ∘ -$1,366.99
To calculate the Net Present Value (NPV) of Project Y, apply the following formula:
\[ NPV = \sum \left( \frac{C_t}{(1+r)^t} \right) - C_0 \]
Where:
- \( C_t \) is the cash flow at time \( t \),
- \( r \) is the discount rate (12% in this case),
- \( C_0 \) is the initial investment (-$10,000 at time 0).
Analyze the cash flows over the 5-year period and choose the correct NPV from the options provided.](https://content.bartleby.com/qna-images/question/302e2d83-124e-4749-a014-0416d12786b1/10b3c581-9ee0-43d5-8362-aa8ba0902731/7fe6vm_processed.png)
Transcribed Image Text:**Compute the NPV statistic for Project Y given the following cash flows and if the appropriate cost of capital is 12 percent.**
**Project Y**
| Time | 0 | 1,000 | 2,000 | 3,000 | 4,000 | 5,000 |
|------|---------|-------|-------|-------|-------|-------|
| Cash Flow | -$10,000 | $3,000 | $4,000 | $1,000 | $2,000 | $500 |
**Multiple Choice**
- ∘ -$1,539.14
- ∘ $18,133.88
- ∘ -$1,866.12
- ∘ -$1,366.99
To calculate the Net Present Value (NPV) of Project Y, apply the following formula:
\[ NPV = \sum \left( \frac{C_t}{(1+r)^t} \right) - C_0 \]
Where:
- \( C_t \) is the cash flow at time \( t \),
- \( r \) is the discount rate (12% in this case),
- \( C_0 \) is the initial investment (-$10,000 at time 0).
Analyze the cash flows over the 5-year period and choose the correct NPV from the options provided.
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