Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Related questions
Question
![**Investment Opportunity Analysis**
You have an opportunity to invest $49,200 now in return for $60,900 in one year. If your cost of capital is 7.6%, what is the NPV (Net Present Value) of this investment?
---
The NPV will be $____. (Round to the nearest cent.)
---
### Explanation:
To determine the NPV of this investment, you need to discount the future cash flows back to their present value and subtract the initial investment. The formula for NPV is:
\[ \text{NPV} = \frac{C_t}{(1 + r)^t} - C_0 \]
Where:
- \( C_t \) = Cash inflow at time t ($60,900)
- \( C_0 \) = Initial investment ($49,200)
- r = Discount rate (7.6% or 0.076)
- t = Time period (1 year)
By inputting the given values into the formula, you can solve for the NPV.](https://content.bartleby.com/qna-images/question/8e3b61c9-20cc-45b0-8820-712e68e1a019/47473282-daa7-4354-ac6f-5fc60865fc53/4295vib_processed.jpeg)
Transcribed Image Text:**Investment Opportunity Analysis**
You have an opportunity to invest $49,200 now in return for $60,900 in one year. If your cost of capital is 7.6%, what is the NPV (Net Present Value) of this investment?
---
The NPV will be $____. (Round to the nearest cent.)
---
### Explanation:
To determine the NPV of this investment, you need to discount the future cash flows back to their present value and subtract the initial investment. The formula for NPV is:
\[ \text{NPV} = \frac{C_t}{(1 + r)^t} - C_0 \]
Where:
- \( C_t \) = Cash inflow at time t ($60,900)
- \( C_0 \) = Initial investment ($49,200)
- r = Discount rate (7.6% or 0.076)
- t = Time period (1 year)
By inputting the given values into the formula, you can solve for the NPV.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by stepSolved in 3 steps
Knowledge Booster
Similar questions
- Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.arrow_forwardVipul barrow_forwardHelp pleasearrow_forward
- Only typing. ...arrow_forwardYou have an opportunity to invest $102,000 now in return for $80,300 in one year and $29,400 in two years. If your cost of capital is 8.9%, what is the NPV of this investment? The NPV will be $. (Round to the nearest cent.)arrow_forwardplease help me with all workingsarrow_forward
- You have the opportunity of making a $5,000 investment. The outcomes one year from now will be either $5,000 or $6,000 with an equal chance of either outcome occurring. What is the expected rate of return? 10% 15% 20% 25%arrow_forwardwhat is the maximum amount you would be willing to pay for an investment opportunity that you expect to bring you $1,100 in one year, 2,420 in 2 years and $3000 per year for the following 5 years given that you require a return of 10% on investment with similar level of risks? 1. 12,398 2. 17,000 3. 14,372 4. 18,520 5. 11,372arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education