Question
You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from
| You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. | ||||
| What is the NPV of the opportunity if the cost of capital is 6% per year? Should you take the opportunity? |
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| What is the NPV of the opportunity if the cost of capital is 2% per year? Should you take it now? |
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| Initial investment | $ 10,000 |
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| Cash flow year 1 | $ 500 |
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| Cash flow year 2 | $ 1,500 |
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| Cash flow year 10 | $ 10,000 |
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| What is the NPV of the opportunity if the cost of capital is 6% per year? Should you take the opportunity? |
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| Cost of capital | 6% |
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| NPV |
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| Take opportunity (Yes/No) |
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| What is the NPV of the opportunity if the cost of capital is 2% per year? Should you take it now? |
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| Cost of capital | 2% |
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| NPV |
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| Take opportunity (Yes/No) |
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Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
10th edition
978-0078034633
