An investor is considering the purchase of a small of income-producing property for $10,000 that is expected to produce the following cash flows:
Year 1: $3,000
Year 2: $3,000
Year 3: $3,000
Year 4: $3,000
Assume the investor has a required internal rate of return of 8%. What is the net present value (NPV) of this investment opportunity? Should they make the investment?
If the required internal rate of return falls to 7%, should they make the investment? Please specify a criterion by using NPV

Answer rating: 100% (QA)

To calculate the net present value NPV of the investment opportunity we need to discount the cash flows by the required internal rate of return IRR Th... View the full answer