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2 November, 14:27

Salvatore has the opportunity to invest in a scheme which will pay $5000 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) - $3189.80

B) - $5907.57

C) 5907.57

D) $3189.80

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Answers (1)
  1. 2 November, 16:33
    0
    D) $3189.80

    Explanation:

    Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

    Outflows 10000 10000

    Inflows 5000 5000 5000 5000 5000

    Netflows - 10000 - 5000 5000 5000 5000 5000

    DCF @3% 1 0.971 0.942 0.915 0.888 0.8626

    PV - 10,000 - 4855 4710 4575 4440 4313

    NPV = $3,183
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