The Seattle Corporation has been presented with an investment opportunity which will yield end of year cash flows of $30,000 per year in Years 1 through 4,$35,000 per year in Years 5 through 9,and $40,000 in Year 10.This investment will cost the firm $150,000 today,and the firm's cost of capital is 10%.What is the NPV for this investment?

Question

Quizplus · Accepted Answer

NPV = 11ea7fdb_fbe0_f298_a768_e9dd4558959e_TB2902_11 11ea7fdb_fbe0_f299_a768_e3f545ce4994_TB2902_11 - Initial Investment
NPV = 11ea7fdb_fbe0_f29a_a768_51486cbbc089_TB2902_11 + 11ea7fdb_fbe1_19ab_a768_8b7e9ff50ddf_TB2902_11 + 11ea7fdb_fbe1_19ac_a768_4d5d2d8c1f04_TB2902_11 + 11ea7fdb_fbe1_19ad_a768_75fc83db94c8_TB2902_11 + 11ea7fdb_fbe1_19ae_a768_b548438c49b1_TB2902_11 + 11ea7fdb_fbe1_40bf_a768_355b66ead5b4_TB2902_11 + 11ea7fdb_fbe1_40c0_a768_893b445811dd_TB2902_11 + 11ea7fdb_fbe1_40c1_a768_17e8ed5abdd3_TB2902_00 + 11ea7fdb_fbe1_40c2_a768_01d97744ec3f_TB2902_00 + 11ea7fdb_fbe1_67d3_a768_85dce75e98f7_TB2902_11 - 150,000 = $51,138
Using a financial calculator: CF0 = -150,000, C01 = 30,000, F01 = 4, C02 = 35,000, F02 = 5, C03 = 40,000, F03 = 1, NPV I = 10, CPT NPV = $51,138

The Seattle Corporation Has Been Presented with an Investment Opportunity