What Is the Net Present Value of the Following Cash

question 84

Multiple Choice

What is the net present value of the following cash flows if the relevant discount rate is 11.4 percent? $$\begin{array} { | c | r | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - \$ 32,400 \\\hline 1 & 10,620 \\\hline 2 & 16,800 \\\hline 3 & - 3,110 \\\hline 4 & 26,600 \\\hline\end{array}$$

• A)$4,887.26
• B)$5,006.19
• C)$8,215.46
• D)$13,058.39
• E)$18,519.71

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Definitions:

Market Risk Premium

The additional return an investor demands for taking on the risk of investing in the stock market over a risk-free rate.

Beta

A measure of the volatility, or systematic risk, of a security or portfolio compared to the entire market.

Portfolio P

This term typically represents a specific set of investments held by an individual or organization, potentially including stocks, bonds, and other assets.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, taking into account its risk level.