Find the NPV: Financial Calculator: Investment that pays $4,880 at the end of each of the next 3 years. Initial cost of $1,220 and a cost at the end of the 2nd year of $6,100. Interest rate is 1.7%.
Find the NPV: Financial Calculator: Investment that pays $4,880 at the end of each of the next 3 years. Initial cost of $1,220 and a cost at the end of the 2nd year of $6,100. Interest rate is 1.7%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Find the
Investment that pays $4,880 at the end of each of the next 3 years. Initial cost of $1,220 and a cost at the end of the 2nd year of $6,100. Interest rate is 1.7%.
My numbers in the FC are:
N: 3
I/Y: 1.7%
PV: CPT; Initial Investment cost of -7,320
PMT: 4,880 each year (3x) CF1/CF2/CF3
FV: 0
My benefit was $14,155.99 - my cost of $7,320.00 = $6,835.99.
My answer is incorrect. What am i doing wrong?
Expert Solution
Step 1
cash flow according to the question
where,
CFt= cashflow at time t
r = rate
t = time period of cashflow
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