Consider a situation where you have \($847\) in your pocket that you can invest at a rate of 20 percent. You are required to make a payment of \($600\) at time t = 1 and another \($500\) at t = 2. You decide to spend \($47\) in a nice restaurant today and invest the rest of the money.

a. Will you be able to afford the required payments in t = 1 and t = 2?

b. Compare your answers to

a. and to the previous exercise.

c. Reflect on the fact that NPV can be defined as the expected value created (today!) for investors.