A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment is

A) $1041.32
B) $541.32
C) $1090.91
D) $590.91

Question

​A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment isA) ​$1041.32B) $541.32C) $1090.91D) ​$590.91

Keren Alvarez · Accepted Answer

Final Answer : B, Explanation :  The net present value (NPV) is calculated by discounting the future cash flows back to their present value and subtracting the initial investment. Here, the cash flows of $600 for two years are discounted at a 10% rate, and then the initial investment of $500 is subtracted. The calculation is as follows: NPV = ($600 / (1+0.10)^1) + ($600 / (1+0.10)^2) - $500 = $545.45 + $495.87 - $500 = $541.32.

A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment is

A) $1041.32
B) $541.32
C) $1090.91
D) $590.91

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Learning Objectives

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​A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment isA) ​$1041.32B) $541.32C) $1090.91D) ​$590.91

Definitions

Learning Objectives

Learning Objectives

Related questions

A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment is

A) $1041.32
B) $541.32
C) $1090.91
D) $590.91