Question $2$

Your grandmother's trust fund will pay you $$1000$ each year for $15$ years starting today. It so happens that,

you have to pay for your car loan: $15$ annual payments of $$1000$ each starting one year from now. What is the

NPV of these cash flows? Hint: Draw a time line to see if any of these cash flows can cancel each other and

think about the concept of TVM$.$

$($NPV $=$PV$($inflows$)-$PV$($outflows$))$

Negative because cash outflows start first.

Negative because cash inflows start first.

Positive, because cash inflows start first.

Zero, because positive and negative cash flows offset.