Henrico Company has two investment opportunities. Both investments cost $6,100 a

Question

Henrico Company has two investment opportunities. Both investments cost $6,100 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below: Investment I Investment II Period 1 $ 1,550 $ 1,550 Period 2 1,550 2,660 Period 3 2,550 3,770 Period 4 4,880 2,550 Total $ 10,530 $ 10,530 The net present value of Investment II assuming an 8% minimum rate of return would be which of the following amounts? (Do not round your PV factors and intermediate calculations. Round your answer to the nearest whole dollar.) $10,530 $8,375 $8,583 $2,483

Explanation / Answer

Investment II

Year

CashFlow

PV Factor@ 8%

PV

0

               (6,100)

1.0000

                          (6,100)

1

                 1,550

0.9259

                             1,435

2

                 2,660

0.8573

                             2,281

3

                 3,770

0.7938

                             2,993

4

                 2,550

0.7350

                             1,874

NPV

                             2,483

Investment II

Year

CashFlow

PV Factor@ 8%

PV

0

               (6,100)

1.0000

                          (6,100)

1

                 1,550

0.9259

                             1,435

2

                 2,660

0.8573

                             2,281

3

                 3,770

0.7938

                             2,993

4

                 2,550

0.7350

                             1,874

NPV

                             2,483

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