You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500

Question:

You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1500 two years from now, and $10,000 ten years from now.

a. What is the NPV of the opportunity if the cost of capital is 6% per year? Should you take the opportunity?

b. What is the NPV of the opportunity if the cost of capital is 2% per year? Should you take it now?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...