Henrico Company has two investment opportunities. Both investments cost $6,300 a

Question

Henrico Company has two investment opportunities. Both investments cost $6,300 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:

    
The net present value of Investment II assuming a 8% minimum rate of return would be which of the following amounts? (Do not round your PV factors and intermediate calculations. Round your answers to the nearest whole dollar.)

$2,663

$10,990

-$8,751

$8,963

Investment II   Period 1 $ 1,650         $ 1,650           Period 2 1,650         2,780           Period 3 2,650         3,910           Period 4 5,040         2,650           Total $ 10,990         $ 10,990        

Explanation / Answer

Answer: The NPV of the Investment II is $2663

Year Investment II P.V.F (8%) PV($) 0 -6300 1 -6300 1 1650 0.926 1527.9 2 2780 0.857 2382.46 3 3910 0.7938 3103.758 4 2650 0.735 1947.75 NPV 2663

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