Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $8000 at the end of each of the next three years. The opportunity requires an initial investment of $2000 plus an additional investment at the end of the second year of $10,000.

What is the NPV of this opportunity if the interest rate is 10% per year? Should Marian take it?

Perpetuities and Annuities AppendixLO1