Sam Weller is thinking of investing $70,000 to start a bookstore.Sam plans to withdraw $15,000 from the business at the end of each year for the next five years.At the end of the fifth year,Sam plans to sell the business for $110,000 cash.At a 12% discount rate,what is the net present value of the investment?
A) $46,445.
B) $54,075.
C) $62,370.
D) $70,000.

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the future cash flows to their present value and subtracting the initial investment. The cash flows include $15,000 annually for five years and $110,000 at the end of the fifth year. Using a 12% discount rate, the NPV is approximately $46,445.

Sam Weller Is Thinking of Investing $70,000 to Start a Bookstore.Sam