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

The NPV is calculated by subtracting the initial investment from the present value of future cash flows. The present value of $115,000 received in one year at a 6% interest rate is $115,000 / (1 + 0.06) = $108,490.57. The NPV is $108,490.57 - $100,000 = $8,490.57, which rounds to $8491.

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