Salvatore has the opportunity to invest in a scheme which will pay $5,000 at the end of each of the next 5 years. He must invest $10,000 at the start of the first year and an additional $10,000 at the end of the first year. What is the present value of this investment if the interest rate is 3%? A. −$5,907.57 B. −$3,189.80 C. $5,907.57 D. $3,189.80
Salvatore has the opportunity to invest in a scheme which will pay $5,000 at the end of each of the next 5 years. He must invest $10,000 at the start of the first year and an additional $10,000 at the end of the first year. What is the present value of this investment if the interest rate is 3%? A. −$5,907.57 B. −$3,189.80 C. $5,907.57 D. $3,189.80
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8EA: You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how...
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Question
Salvatore has the opportunity to invest in a scheme which will pay
$5,000
at the end of each of the next 5 years. He must invest
$10,000
at the start of the first year and an additional
$10,000
at the end of the first year. What is the present value of this investment if the interest rate is
3%?
−$5,907.57
−$3,189.80
$5,907.57
$3,189.80
Expert Solution
Step 1 Introduction
This question provides that a scheme will pay 5000 per year at the end of each year for next 5 years if an investor invests 10000 at t0 and 10000 at t1.
Net Present Value = Present value of inflows - Present value of outflows
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