P7-2 (similar to)

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You are considering investing in a start up company. The founder asked you for

$260,000

today and you expect to get

$930,000

in

9

years. Given the riskiness of the investment opportunity, your cost of capital is

26%.

What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

What is the NPV of the investment opportunity?

The NPV of the investment is

$nothing.

(Round to the nearest dollar.)