Sony is thinking about investing in a new project. Suppose that the project costs $10 million and will yield the company $20 million in 10 years. If the interest rate is 5 per cent, what is the present value of the yield in 10 years?
A) $9.5 million
B) $10.5 million
C) $12.3 million
D) $16.3 million

Question

Quizplus · Accepted Answer

The present value of the yield in 10 years can be calculated as PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years. Plugging in the numbers, we get PV = 20 million / (1 + 0.05)^10 = 12.3 million. Therefore, choice C is the best choice.

Sony Is Thinking About Investing in a New Project