Question
A friend of yours has offered to let you in on a limited partnership to open a new video arcade. He wants you to invest
A friend of yours has offered to let you in on a limited partnership to open a new video arcade. He wants you to invest $50,000 now for a 10% partnership and he has projected the following cash flows for your returns. You have asked around and believe the appropriate discounting rate is 16%.
Cash flow
Year 1 0
Year 2 0
Year 3 $20,000
Year 4 $20,000
Year 5 $70,000 When he buys out your share
What is the net present value of this opportunity?
Step by Step Solution
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Step: 1
To calculate the net present value NPV of this investment opportunity we need to discount each cash ...
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Fundamentals of corporate finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
2nd Edition
978-0470933268, 470933267, 470876441, 978-0470876442
