On January 1, a company invested in an asset with a useful life of 3 years. Thecompany’s expected rate of return is 10%. The cash flow and present and future valuefactors for the 3 years are as follows:Cash InflowPresentFuture ValueValueYear from the Assetof $1 atof $1 at 10%10%1$ 8,000.911.109,000.831.2110,000.751.33All cash inflows are assumed to occur at year end. If the asset generates a positive netpresent value of $2,000, what was the amount of the original investment?A. $30,991B. $20,250C. $33,991D. $22,25023

Let CFn be the cashflow in year n. CF1 = $8000 CF2 = $9000 CF3 = $10000 r = 10% Present value factor…

Answered: On January 1, a company invested in an…

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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