Answers
NPV = sum of present values of cash flows
present value of each cash flow = cash flow / (1 + discount rate)n
where n = number of years after which the cash flow occurs
NPV = $5,628
Yes, you should invest in this deal because the NPV is positive
A B C Cash PV of 1 Year Flow Cash Flow 0 $(30,000) $(30,000) 1 $ 4,500 $ 4,167 2 $5,000 $ 4,287 3 $ 5,000 $ 3,969 4 $ 5,000 $3,675 5 $ 5,000 $3,403 6 $ 8,000 $ 5,041 7 $ 19,000 $ 11,086 NPV $ 5,628
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