NPV and Opportunity Cost of Capital

Related BrainMass Solutions

• Choosing between two mutually exclusive projects

  Which would you choose if the opportunity cost of capital is 12 percent? Why does you answer change? NPV is defined as the difference between an investment's market value and its cost.

• Preferred use of NPV over accounting rate of return

  Hence cost of equity represents the opportunity cost of the shareholders. Cost of debt represents cost of borrowed amount. Also cost of preferred stock represents opportunity cost of raising money from preferred stock holders.

• Net Present Value

  120860 NPV What is the NPV of a project that costs $100,000 and returns $45,000 annually for three years if the opportunity cost of capital is 14%?

• Opportunity Cost and Capital Balance

  What is the correct opportunity cost that should be used in calculating the NPV of my taxi service? 2. If the working capital balance was $140,000 at the end of 2011 and was $100,000 at the end of 2012.

• Should You Take the Investment Opportunity?

  Calculate the NPV of this investment opportunity if your cost of capital is 8%. Should you make the investment?

• Calculating Net Present and future Values

  If the opportunity cost of capital is 14%, what is the NPV of the factory? What will the factory be worth at the end of five years?

• Minimum cash flow and opportunity cost if capital

  Initial cost = $100,000; cash flows at end of years one and two = $35,000; opportunity cost of capital = 10%.

• NPV & IRR of an investment

  132445 NPV & IRR of an investment Your firm has an opportunity to male an investment of $50,000. Its cost of capital is 12%.

• NPV-best method for making capital budgeting decisions

  (This opportunity cost can be inferred from the capital market and is based on its risk characteristics of the investment.)

• NPV & IRR

  141833 Calculating NPV & IRR 1) Your firm has an opportunity to make an investment of $50,000. Its cost of capital is 12 percent.