A friend of yours has offered to let you in on a limited partnership to open a new video arcade. He wants you to invest $50,000 now for a 10% partnership and he has projected the following cash flows for your returns. You have asked around and believe the appropriate discounting rate is 16%. 

 

 

 Cash flow

Year 1 0

Year 2 0

Year 3  $20,000

Year 4  $20,000 

Year 5  $70,000 When he buys out your share

What is the net present value of this opportunity?

Answer rating: 100% (QA)

To calculate the net present value NPV of this investment opportunity we need to discount each cash ... View the full answer