A firm has an opportunity to invest $100,000 today that will yield $115,000 in one year. If interest rates are 6%, what is the net present value (NPV) of this investment?

Question

Quizplus · Accepted Answer

To find the net present value (NPV), we need to discount the future cash flow (in this case, $115,000) back to its present value using the given interest rate (6%) and then subtract the initial investment ($100,000). 
NPV = -$100,000 + $115,000/(1+0.06) 
NPV = -$100,000 + $108,509.43 
NPV = $8,509.43 
Therefore, the correct answer is C – $8,491.

A Firm Has an Opportunity to Invest $100,000 Today That