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# Calculating Net Present and future Values

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1.Calculate the NPV for each of the following investments. The opportunity cost of capital is 20% for all four investments.

Investment Initial Cash Expenditures Year 1 Cash Flow

A (\$10,000) \$18,000
B (\$ 5.000) \$ 9,000
C (\$ 5,000) \$ 5,700
D (\$ 2,000) \$ 4,000

A. What is the NPV of each investment?
B. Which investment is the most valuable?

2.A factory costs \$800,000. You believe that it will produce an inflow after operating costs of \$170,000 a year for 10 years. 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?

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Solutions:

1.Calculate the NPV for each of the following investments. The opportunity cost of capital is 20% for all four investments.

Investment Initial Cash Expenditures Year 1 Cash Flow

A (\$10,000) \$18,000
B (\$ 5.000) \$ 9,000
C (\$ 5,000) \$ 5,700
D (\$ 2,000) \$ 4,000

A. What is the NPV of each investment?

NPV of Investment A= ...

#### Solution Summary

Solution describes the steps for determining net present and future values.

\$2.49