You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 8% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 4% per year? Should you take the opportunity?
You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 8% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 4% per year? Should you take the opportunity?
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
Related questions
Question
Transcribed Image Text:You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from
now, $1,500 two years from now, and $10,000 ten years from now.
a. What is the NPV of the investment opportunity if the interest rate is 8% per year? Should you take the opportunity?
b. What is the NPV of the investment opportunity if the interest rate is 4% per year? Should you take the opportunity?
a. What is the NPV of the investment opportunity if the interest rate is 8% per year?
The NPV of the investment opportunity if the interest rate is 8% per year is $. (Round to the nearest dollar.)
Should you take the investment opportunity (Select the best choice below.)
A. Reject it because the NPV is less than 0.
B. Take it because the NPV is equal to or greater than 0.
b. What is the NPV of the investment opportunity if the interest rate is 4% per year?
The NPV of the investment opportunity if the interest rate is 4% per year is $
(Round to the nearest dollar.)
Should you take the investment opportunity (Select the best choice below.)
A. Reject it because the NPV is less than 0.
B. Take it because the NPV is equal to or greater than 0.
Expert Solution
Given Information:
Amount Investved today is $10,000
Cash flow at year 1 is $500
Cash flow at year 2 is $1,500
Cash flow at year-3 is $10,000
To Find:
- NPV of the project
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
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