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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

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