Question: Forget the 1 in the blue NPV box For problems 5 & 6 use required nominal annual return of : 5.50% 5. Consider the following

Forget the 1 in the blue NPV box For problems 5

Forget the 1 in the blue NPV box

For problems 5 & 6 use required nominal annual return of : 5.50% 5. Consider the following end-of-year cash flows: Year Cash flow 0 1 $30.00 $40.00 $60.00 $60.00 2 3 Net Present Value (NPV) a. What is the present value of these cash flows (in year O)? b. If the purchase price of this investment is $200 today, would you buy it? Why? (Compare instrinsic value to actual price)

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