NPV: Basic Concepts Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inflow one year from now of $810,000. Assume the cost of capital is 10 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Break the $810,000 future cash inflow into the three components shown below. Enter all your answers as positive amounts. a. The return of the original investment $ 600,000 b. The cost of capital $ 60,000 c. The profit earned on the investment $150,000 2. Now, compute the present value of the profit earned on the investment. $136,350 3. Compute the NPV of the investment. When required, round your answer to the nearest dollar.

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
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NPV: Basic Concepts

Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inflow one year from now of $810,000. Assume the cost of capital is 10 percent.

The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.

Required:

1. Break the $810,000 future cash inflow into the three components shown below. Enter all your answers as positive amounts.

a. The return of the original investment $ 600,000
b. The cost of capital $ 60,000
c. The profit earned on the investment $150,000

2. Now, compute the present value of the profit earned on the investment.
$136,350

3. Compute the NPV of the investment. When required, round your answer to the nearest dollar.
$

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