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On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and
On January 1, Year One, a company spends $60,000 on an investment that will return $20,000 on each December 31 of Years One, Two, and Three as well as an additional $30,000 on December 31, Year Three. The company has a desired rate of return of 10 percent per year. The present value of $1 paid in three periods at a 10 percent rate of return is .751. The present value of an ordinary annuity of $1 paid over three periods at a 10 percent rate of return is 2.487. Which of the following statements is true? a. The investment has a positive net present value of $12,270. b. The investment has a positive net present value of $ 7,590. c. The investment has a positive net present value of $17,250. d. The investment has a positive net present value of $16,860.
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