Answer:
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
