If $ 12 comma 000 is invested in a certain business at the start of the year, the investor will receive $ 3 comma 600 at the end of each of the next four years. What is the present value of this business opportunity if the interest rate is 3 % per year? A. $ 2 comma 210

PV of business opportunity = $1,381.55

Explanation:

The present value of the business opportunity is the difference between the present value of the streams cash inflow and the initial investment cost

PV of streams of cash inflows:

PV of cash flow = A * (1 - (1+r) ^ (-n)) / r

A - 3,600, r - 3%, n - 4

= 3,600 * (1 - (1.03^ (-4)) / 0.03

=$13,381.55

PV of the business opportunity

= $13,381.55 - 12,000

= $1,381.55