Given the Following Expected Cash Flow Stream, Determine the NPV

question 30

Multiple Choice

Given the following expected cash flow stream, determine the NPV of the proposed investment in an income producing property and determine whether or not the investment should be pursued. Investment Horizon: 5 years; Expected Yearly Cash Flow in each of the next five years: $127,628. Expected Sale Price at end of 5 years: $1,595,350; Opportunity Cost of Investment 6%; Current Market Price of Property: $1,750,000

• A) NPV is -$20,246; Decision is to invest
• B) NPV is -$20,246; Decision is not to invest
• C) NPV is $249,967; Decision is to invest
• D) NPV is $249,967; Decision is to not invest

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Definitions:

PTH

Parathyroid hormone, a hormone secreted by the parathyroid glands that regulates serum calcium and phosphate levels.

Insulin

A hormone produced by the pancreas that helps regulate blood glucose levels by facilitating the uptake of glucose by cells.

Adrenal Cortex

The outer portion of the adrenal gland that produces steroid hormones including cortisol and aldosterone.

Glucagon

A hormone produced by the pancreas that raises blood glucose levels, acting as a counter-regulatory hormone to insulin.