An investment prefers to pay $2000 at the end of the first year, and then $3500...

Question

Question

An investment prefers to pay $2000 at the end of the first year, and then $3500 for year 2, year 3 and year 4. If the interest rate is 10%, what is the value of this investment? Use the NPV function and show all work

Answer 1

Answer #1

NPV = -initial investment + PV of future cash flows

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

NPV = 2000/1.1 + 3500/1.1^2 + 3500/1.1^3 + 3500/1.1^4

= 9730.89

Answer 2

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