Question

an investment under consideration has a payback of six years and a cost of 876000. Assume the cash flows are conventional. If the required return is 12 percent, what is the worst-case NPV?

Answer 1

-43291.14

Step-by-step explanation:

Npv = net present value

Payback = 6 years

Required return = 12 percent

Cost = 876000

When we talk about last case npv we mean that cash flow has gotten to its last future. The entire cost of 876000 will have to be paid after 6 years and after that future cash flows would exist.

Npv = -876000 +(876000/1.12)⁶

= -876000+443808.86

= = -43291.14