You are offered an investment opportunity that costs you $28,000,has an NPV of $2278,lasts for three years,has interest rate of 10%,and produces the following cash flows: The missing cash flow from year 2 is closest to:

Question

You are offered an investment opportunity that costs you $28,000,has an NPV of $2278,lasts for three years,has interest rate of 10%,and produces the following cash flows:  The missing cash flow from year 2 is closest to:

Quizplus · Accepted Answer

To find the missing cash flow for year 2, we need to use the formula for NPV:

NPV = ∑(Cash flow / (1 + r)^n) - Initial investment

Where r is the interest rate, n is the year, and ∑ represents the sum of all the cash flows.

We know that the initial investment is $28,000 and the NPV is $2278. We can use this information along with the other cash flows to solve for the missing cash flow in year 2.

NPV = $2278 = (-$28,000) + ($10,000 / 1.1) + (X / 1.1^2) + ($13,000 / 1.1^3)

Solving for X, we get:

X = $12,000

Therefore, the missing cash flow for year 2 is $12,000, which is closest to choice letter B.

You Are Offered an Investment Opportunity That Costs You $28,000,has