Question

An investment costs $1,548 and pays $138 in perpetuity. If the interest rate is 9%, what is the npv?

Answer 1

Answer:

hope this helps you............

Answer 2

NPV for the given data is = -14.67

Explanation:

Net present value (NPV) is a method of balancing the current value of all future cash flows generated by a project against an initial capital investment.

It is the simple addition of the present value at time 0 of all the cash flows of a particular investment over the time period of the investment. A positive NPV shows value addition to the firm or project invested in.

- PV = C/r where PV is the present value, c is the perpetuity and r is the interest rate.

NPV = PV- investment cost

NPV = $-1548+\frac{138}{0.09}$ = $-1548+1533.33$ = $-\ 14.67$