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# Calculating the Net Present Value

Linda Johnson is a freshmen at State University. She is considering starting a business in her dorm room that would sell computer supplies such as diskettes and ink cartridges to her fellow students. Gina estimates the business would generate \$1,500 in net cash flow each of the next four years. To start the business she would need to acquire a computer at the cost of \$2,000. It has an estimated salvage value of \$500 at the end of four years. She also was must spend \$4,000 for inventory items; all of this money will be recovered at the end of the year four. Gina cost of capital is 9%.

What is the net present value of this investment opportunity?

a. \$ (786).
b. \$1,694
c. \$2,048
d. \$8,048

#### Solution Preview

Please view the attached Excel file, which provides an analysis of this scenario, to ...

#### Solution Summary

Excel spreadsheet shows how to find the net present value of an investment opportunity for inventory items.

\$2.19