Question: This is the correct calculation of net present value a new piece of equipment that is expected to cost $200,000 at the time of purchase
This is the correct calculation of net present value a new piece of equipment that is expected to cost $200,000 at the time of purchase (Year 0) and returns $150,000 per year for three years, and a cost of capital of 10%.
| Year 0 | Present value | = | $200,000/ (1.100) | = | $200,000 |
| Year 1 | Present value | = | $150,000/ (1.101) | = | $136,364 |
| Year 2 | Present value | = | $150,000/ (1.102) | = | $123,967 |
| Year 3 | Present value | = | $150,000/ (1.103) | = | $112,697 |
| Sum of present values, or NPV | $173,028 | ||||
Group of answer choices
True
False
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
Study Help