Cortez Art Gallery is adding to its existing buildings at a cost of $2 million. The gallery expects to bring in additional cash flows of $520,000, $700,000, and $1,000,000 over the next three years. Given a required rate of return of 10 percent, what is the NPV of this project?
David has purchased an investment that he expects to produce an annual cash flow of $3,000 at the beginning of the next five years. He requires an 8% rate of return compounded annually. What is the maximum amount that David can pay and still earn the required rate of return?
What is the net present value of a project with the following cash flows if the discount rate is 8 percent?
| Year | CFs |
|---|---|
| 0 | -690 |
| 1 | 1,133 |
| 2 | 543 |
| 3 | 428 |
What is the net present value of a project with the following cash flows if the required rate of return is 12 percent?
Year 0: -42,398
Year 1: 13,407
Year 2: 21,219
Year 3: 17,800
A restaurant is for sale for $200,000. It is estimated that the restaurant will earn $20,000 a year for the next 15 years. At the end of 15 years, it is estimated that the restaurant will sell for $350,000. Which of the following would be MOST LIKELY to occur if the investor’s required rate of return is 15 percent?
a. Investor would pursue the project.
b. Investor would not pursue the project.
c. Investor would pursue the project if the holding period were longer than 15 years.
d. Not enough information provided.
