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    NPV of cash flow stream, expected rate of return

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    My investment is expected to pay the following annual cash flows:

    0 1 2 3 4 5
    600 600 800 1200 1500

    Being an investor I think the appropriate interest rate for this investment is 12.5%, what is the net present value of this cash flow stream?

    Now if the price of this investment is really 3,200 what is my expected rate of return on this investment?

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    Solution Summary

    This solution illustrates how to compute the net present value of a cash flow stream and the expected rate of return on an investment.