What Is the Net Present Value of the Following Sequence $\frac { t = 1 } { 100,000 } \quad \frac { t = 2 } { 300,000 }$

question 5

Multiple Choice

What is the net present value of the following sequence of annual cash flows at a discount rate of 16 percent APR? $\frac { t = 1 } { 100,000 } \quad \frac { t = 2 } { 300,000 }$

• A)$136,741.97
• B)$122,948.87
• C)$158,620.69
• D)$139,418.23

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Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows over a period of time.

Compound Interest

A method of interest calculation on a loan or deposit that involves both the initial principal and the cumulative interest from earlier periods.

Initial Investment

The initial amount of money invested in a project, property, or business to start operations.

Required Rate

The minimum return an investor expects to achieve when investing in a project or security.