Net present value and profitability index
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Calculate the net present value and profitability index of an uneven cash flow.
Investment A
Initial Investment is $180,325
Net cash flow
year 1 = $45,000
year 2 = $50,000
year 3 = $82,295
year 4 = $86,400
year 5 = $64,000
Investment B
Initial Investment is $150,960
Net cash flow
year 1 = $35,000
year 2 = $52,000
year 3 = $58,000
year 4 = $75,000
year 5 = $29,000
There is a 10% return on investment. Explain which investment I would like to consider and why.
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Solution Summary
The solution explains the calculation of net present value and profitability index of an uneven cash flow based on the information given about investments. Step by step calculations are provided in the solution along with explanations.
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Problems: Calculate the net present value and profitability index of an uneven cash flow. There is a 10% return on investment. Explain which investment I would like to consider and why.
Solution:
NPV = PV of cash flows - initial ...
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