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30 December, 15:10

A firm has an opportunity to invest $95,000 today that will yield $109,250 in one year. If interest rates are 4%, what is the net present value (NPV) of this investment? A) $16,077B) $11,053C) $10,048D) $14,250

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  1. 30 December, 15:39
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    The net present value (NPV) of this investment is C) $10,048

    Explanation:

    Net present value (NPV) is the value of the future cash flows over the entire life of an investment discounted to the present.

    The firm invests $95,000 today that will yield $109,250 in one year. The interest rates of the investment are 4%. The net present value (NPV) of this investment:

    NPV = $109,250 / (1+4%) - $95,000 = $10,048
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