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? |
| |||
What is the NPV of the opportunity if the cost of capital is 2% per year? Should you take it now? |
| |||
|
|
|
| |
Initial investment | $ 10,000 |
|
| |
Cash flow year 1 | $ 500 |
|
| |
Cash flow year 2 | $ 1,500 |
|
| |
Cash flow year 10 | $ 10,000 |
|
| |
|
|
|
| |
What is the NPV of the opportunity if the cost of capital is 6% per year? Should you take the opportunity? |
| |||
|
|
|
| |
Cost of capital | 6% |
|
| |
|
|
|
| |
NPV |
|
|
| |
Take opportunity (Yes/No) |
|
|
| |
|
|
|
| |
What is the NPV of the opportunity if the cost of capital is 2% per year? Should you take it now? |
| |||
|
|
|
| |
Cost of capital | 2% |
|
| |
|
|
|
| |
NPV |
|
|
| |
Take opportunity (Yes/No) |
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started