You have an investment opportunity that will cost $10,000 today and will return $10,500 in one year.If interest rates are 8%,what is the NPV of this investment?

Question

Quizplus · Accepted Answer

To calculate NPV, we need to discount the future cash flow of $10,500 back to present value using the given interest rate of 8%.

NPV = -$10,000 + ($10,500 / (1+0.08)^1) 
NPV = -$277.78

Since the NPV is negative, this investment would not be a good choice as it would result in a net loss.

You Have an Investment Opportunity That Will Cost $10,000 Today