---### Investment Opportunity and Net Present Value (NPV) Calculation**Scenario Description:**Marian Plunket owns her own business and is considering an investment opportunity. The investment will provide a payment of $4,680 at the end of each of the next 3 years. This opportunity requires an upfront initial investment of $1,170, plus an additional investment of $5,850 at the end of the second year.**Problem Statement:**Calculate the Net Present Value (NPV) of this investment opportunity if the interest rate is 2.3% per year. Based on the NPV, determine whether Marian should undertake this investment.**Graph/Diagram Description:**N/A (There are no graphs or diagrams in the provided content.)**Solution Approach:**To determine whether the investment is viable, we need to calculate its NPV using the given cash flows and interest rate. The formula for NPV is:\[ \text{NPV} = \sum \frac{C_t}{(1 + r)^t} - \text{Initial Investment} \]Where:- $ C_t $ = Cash inflow at time $ t $- $ r $ = Discount rate (2.3% in this case)- $ t $ = Time periodGiven cash flows:- Year 0: -$1,170 (initial investment)- Year 1: +$4,680- Year 2: +$4,680 - $5,850 (additional investment)- Year 3: +$4,680**Question:**What is the NPV of this opportunity if the interest rate is 2.3% per year?The NPV of this opportunity is $ ___ . (Round to the nearest cent.)---

Net present value refers to the method of capital budgeting used for estimating the viability of the…

Answered: Marian Plunket owns her own business…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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