An investment project of 45 k€ should yield 6 k€ in the first year, 8 k€ in the second, 10 k€ in the third and 20 k€ in the fourth, with a residual value of 9 k€. What is its NPV at a discount rate of 4.0%? (I don't know what to do with the residual value at all, Thank you for your help)
An investment project of 45 k€ should yield 6 k€ in the first year, 8 k€ in the second, 10 k€ in the third and 20 k€ in the fourth, with a residual value of 9 k€. What is its NPV at a discount rate of 4.0%? (I don't know what to do with the residual value at all, Thank you for your help)
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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Q) An investment project of 45 k€ should yield 6 k€ in the first year, 8 k€ in the second, 10 k€ in the third and 20 k€ in the fourth, with a residual value of 9 k€.
What is its NPV at a discount rate of 4.0%?
(I don't know what to do with the residual value at all, Thank you for your help)
Solve this early I upvote but correctly answer.
Expert Solution
Step 1
NPV
The PV (cash inflows) and PV (cash outflows) difference over the duration is NPV. The usage of NPV is done for determining the project’s profitability.
It is the best alternative capital budgeting method used as it t is a good indicator of the dynamic investment calculations.
Step 2
The calculation is:
Note: Values in k€
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