Ms. McKinley, owner of Denali Art Gallery, just bought a painting done by a critically-acclaimed, but not yet famous, artist, for $250,000. Experience as an art dealer tells her that if she waits 20 years the artist will be famous, and she will be able to sell the painting for $8,000,000. She expects no other costs; Denali is already insured, for example. Because Ms. McKinley would require a 15% annual rate of return on an equally-risky investment, we view her cost of capital for the painting purchase as 15%/year. What are the net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR) for this investment?

Answer rating: 100% (QA)

Net present value NPV 23880223 Profitability index PI 196 Internal rate of return ... View the full answer