Question

An initial investment of $35,000 in a business guarantees the following cash flows: 5th year $13,000. 6th year $14,000. 7th year $15,000. 8th year $16,000. Assume an interest rate of 4% APR, compounded quarterly. What is the net present value of the cash flows? Is this a profitable investment? $0, break even $9669, Profitable $-9669, not Profitable $-6996, not Profitable $6996, Profitable

          An initial investment of $35,000 in a business guarantees the following cash flows: 5th year $13,000. 6th year $14,000. 7th year $15,000. 8th year $16,000. Assume an interest rate of 4% APR, compounded quarterly. What is the net present value of the cash flows? Is this a profitable investment?

$0, break even
$9669, Profitable
$-9669, not Profitable
$-6996, not Profitable
$6996, Profitable

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An initial investment of 35,000 in a business guarantees the following cash flows: 5th year13,000. 6th year 14,000. 7th year15,000. 8th year 16,000. Assume an interest rate of 4% APR, compounded quarterly. What is the net present value of the cash flows? Is this a profitable investment?0, break even
9669, Profitable-9669, not Profitable
-6996, not Profitable6996, Profitable

Added by Toni V.

Calculus: Early Transcendentals

James Stewart 8th Edition

Instant Answer

Solved by Expert Adi S

06/06/2023

Step 1

Since the interest rate is compounded quarterly, we need to adjust the interest rate and the number of periods accordingly. The quarterly interest rate is 1% (4% / 4) and the number of periods for each cash flow is 4 times the number of years. Present Value (PV) Show more…

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An initial investment of $35,000 in a business guarantees the following cash flows: 5th year $13,000. 6th year $14,000. 7th year $15,000. 8th year $16,000. Assume an interest rate of 4% APR, compounded quarterly. What is the net present value of the cash flows? Is this a profitable investment?

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