You have the opportunity to invest in a project with the following cash flows. Initial investment/Outlay today: $11,000. Cashflow back to you in 1 year $6000 Cashflow back to you in 2 years $5000 Scrap Value in 2 years $500
You have the opportunity to invest in a project with the following cash flows. Initial investment/Outlay today: $11,000. Cashflow back to you in 1 year $6000 Cashflow back to you in 2 years $5000 Scrap Value in 2 years $500
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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You have the opportunity to invest in a project with the following cash flows.
Initial investment/Outlay today: $11,000.
Cashflow back to you in 1 year $6000
Cashflow back to you in 2 years $5000
Scrap Value in 2 years $500
Assume interest rates are 5% in the 1 year and 7% in the 2 year. (tip: use the spreadsheet “
a. Calculate the NPV of the project (show formula/workings)?
b. Should you invest in this project? Why ?
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