At a discount rate of 10 percent, what is the net present value of an investment expected to yield $1,000 per year (to be received at year end) for the next two years?

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting each cash flow back to its present value using the formula: NPV = CF1/(1+r)^1 + CF2/(1+r)^2. For this investment: NPV = $1,000/(1+0.10)^1 + $1,000/(1+0.10)^2 = $909.09 + $826.45 = $1,735.54.

At a Discount Rate of 10 Percent, What Is the Net