On January 1, a company invested in an asset with a useful life of 3 years. The company’s expected rate of return is 10%. The cash flow and present and future value factors for the 3 years are as follows: Cash Inflow Present Future Value Value Year from the Asset of $1 at of $1 at 10% 10% 1 $ 8,000 91 1.10 2 9,000 .83 1.21 3 10,000 .75 1.33 All cash inflows are assumed to occur at year end. If the asset generates a positive net present value of $2,000, what was the amount of the original investment? A. $30,991 B. $20,250 C. $33,991 D. $22,250
On January 1, a company invested in an asset with a useful life of 3 years. The company’s expected rate of return is 10%. The cash flow and present and future value factors for the 3 years are as follows: Cash Inflow Present Future Value Value Year from the Asset of $1 at of $1 at 10% 10% 1 $ 8,000 91 1.10 2 9,000 .83 1.21 3 10,000 .75 1.33 All cash inflows are assumed to occur at year end. If the asset generates a positive net present value of $2,000, what was the amount of the original investment? A. $30,991 B. $20,250 C. $33,991 D. $22,250
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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![On January 1, a company invested in an asset with a useful life of 3 years. The
company’s expected rate of return is 10%. The cash flow and present and future value
factors for the 3 years are as follows:
Cash Inflow
Present
Future Value
Value
Year from the Asset
of $1 at
of $1 at 10%
10%
1
$ 8,000
.91
1.10
9,000
.83
1.21
10,000
.75
1.33
All cash inflows are assumed to occur at year end. If the asset generates a positive net
present value of $2,000, what was the amount of the original investment?
A. $30,991
B. $20,250
C. $33,991
D. $22,250
23](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F07be42a1-4870-4a19-ae96-6457a6e512e1%2F2a48f42b-ce28-4f31-bdf3-2eaf463e296d%2Fajwnbzq_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, a company invested in an asset with a useful life of 3 years. The
company’s expected rate of return is 10%. The cash flow and present and future value
factors for the 3 years are as follows:
Cash Inflow
Present
Future Value
Value
Year from the Asset
of $1 at
of $1 at 10%
10%
1
$ 8,000
.91
1.10
9,000
.83
1.21
10,000
.75
1.33
All cash inflows are assumed to occur at year end. If the asset generates a positive net
present value of $2,000, what was the amount of the original investment?
A. $30,991
B. $20,250
C. $33,991
D. $22,250
23
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