You have an investment opportunity that will cost $1,000 today and promises cash flows of $25 in 6 months, $25 in 12 months, $25 in 18 months, and $1,025 at the end of two years. If you
Could earn an APR of 6% on alternative investments, what is this investment's net present
Value? Round your answer to the nearest dollar.
A)+$981
B)-$19
C)+$18
D)-$121

Question

Quizplus · Accepted Answer

To find the NPV, calculate the present value of each cash flow using the formula PV = CF / (1 + r/n)^(nt), where CF is the cash flow, r is the annual interest rate (0.06), n is the number of compounding periods per year (2 for semi-annual), and t is the time in years. Sum these present values and subtract the initial investment of $1,000. The NPV is approximately -$19.

You Have an Investment Opportunity That Will Cost $1,000 Today