Pauli found a book on Finance in a garbage can. After reading it, he tells Silvio that if Silvio will give him $10,000/year for five years with the first payment at the end of this year, then he will give Silvio $10,000/year forever with the first payment occurring at the end of year 6. Silvio's next-best alternative (i.e., what he would do with his money if he didn't take Pauli's offer) is to loan the money to Christopher at 12% (i.e., this is the opportunity cost, and should be used as the discount rate).

 

What is the NPV?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of this investment opportunity we need to discount the cash f... View the full answer