You have the opportunity to make an investment that costs $1.000,000. If you make this investment now, you will receive $250,000 one year from today, $200,000, $150,000 and $ 400,000 two and three years from today, respectively. The appropriate discount rate for thisinvestment is 11 percent. .a. Should you make the investment?b. What is the net present value (NPV) of this opportunity?c. If the discount rate is 10 percent, should you invest? Compute the NPV to support youranswer.

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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You have the opportunity to make an investment that costs $1.000,000. If you make this investment now, you will receive $250,000 one year from today, $200,000, $150,000 and $ 400,000 two and three years from today, respectively. The appropriate discount rate for this
investment is 11 percent. .
a. Should you make the investment?
b. What is the net present value (NPV) of this opportunity?
c. If the discount rate is 10 percent, should you invest? Compute the NPV to support your
answer.

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