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You have been offered a unique investment opportunity. If you invest $25,000 today, you will receive $1,250 one year fromnow, $3,750 two years fromnow, and
You have been offered a unique investment opportunity. If you invest $25,000 today, you will receive
$1,250 one year fromnow, $3,750 two years fromnow, and $25,000 ten years from now.
a. What is the NPV of the investment opportunity if the interest rate is 10% peryear? Should you take theopportunity?
b. What is the NPV of the investment opportunity if the interest rate is 6% peryear? Should you take theopportunity?
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