1. FastDrop economic value
You are planning to place your money in safe government securities, which currently
offer a 4% riskless rate of return. Before making this investment, an entrepreneur
approaches you and asks you to purchase her new business venture, FastDrop, a
delivery service for legal documents that would produce a single cash inflow of
$80,000 at the end of the year. You have determined that 6% is an appropriate risk
premium for this investment. How much would you be willing to pay for Fast Drop?
Question 2
1 pts
2. FastDrop Internal Rate of Return
In question 1 you determined the economic value of FastDrop Delivery Service,
given its end-of-year cash inflow of $80,000 and its opportunity cost of 10%. In
further negotiations the entrepreneur offers to sell you the business for $70,000.
What is the IRR of this offer?
Question 3
1 pts
3. FastDrop NPV
Given the project's opportunity cost and cash flows, determine the project's Net
Present Value.