The Seattle Corporation identifies an investment opportunity that will yield end of year cash flows of $30,000 per year in Years 1 through 2, $35,000 per year in Years 3 through 4, and $40,000 in Year 5. This investment will cost the firm $100,000 today, and the firm's required rate of return is 10 percent. What is the NPV for this investment? (Round off the answer to two decimal places.)

Question

Quizplus · Accepted Answer

To calculate the NPV of this investment, we need to discount each of the cash flows back to their present value and then sum them up. Using a financial calculator or spreadsheet program, we can find the NPV to be $27,104.46. Since this value is positive, the investment would add value to the company and is a good choice to pursue.

The Seattle Corporation Identifies an Investment Opportunity That Will Yield