If $10,000 is invested in a certain business at the start of the year, the investor will receive $3000 at the end of each of the next four years. What is the present value of this business opportunity if the interest rate is 7% per year

Net Present Value = $161.63

Explanation:

Giving the following information:

$10,000 is invested in a certain business at the start of the year.

The investor will receive $3000 at the end of each of the next four years.

Interest rate = 7%

To calculate the net present value, we need to use the following formula:

NPV = - Io + ∑[Cf / (1+i) ^n]

Cf = cash flow = 3,000

n = 4

-Io = - 10,000

i=0. p7

NPV = - 10,000 + (3,000/1.07) + (3,000/1.07^2) + (3,000/1.07^3) + (3,000/1.07^4)

NPV = - 10,000 + $10,161.63

NPV = $161.63