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rouzbehh | 13:24 Thu 13th Jan 2011 | Business & Finance
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2. Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $4000 at the end of each of the next three years. The opportunity requires an initial investment of $1000 plus an additional investment at the end of the second year of $5000. What is the NPV of this opportunity if the interest rate is 2% per year? Should Marian take it?
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what have you calculated it to be?

you cant just ask for answers to homework, you need to have a grasp on how to work it out.
I take the same view as redcrx.

However,If you are able to convert the dollars into pounds sterling, it is possible that a UK resident ABer may assist you.

Ron.
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cost=5000+1000=6000
NPV=4000(1+0.02)^1+4000(1+0.02)^2+4000(1+0.02
)^3-6000=5535.53

Marian should take it because NPV is positive
There you go. Your teacher will be proud of you.
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i did this, so please assist me ,is it correct or not?
It's not correct because you are just adding the 1000 and 5000. The 5000 is a time 1 cash outflow, so it needs to be discounted back to time zero, just as you are discounting the 4000 cash inflows back to time zero,

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