Tom is analyzing an investment that requires $19,000 today and it produces the first cash flow of...

Question

Tom is analyzing an investment that requires $19,000 today and it produces the first cash flow of $670 in two years (year 2). Cash flow is expected to grow at 2.5% a year after year 2, until eternity.

The discount rate is 7%.

Calculate the NPV of this investment?

NPV = ______________

Calculate the

rate of return of this investment?

Rate of return = _________________

Show all calculations.

Prince · Accepted Answer

Sheet1
	1. NPV
	Year	Particular	Cash Flows	Discounting Factor @ 7%	Discounted Cash Flows
	0	Initial Investment	-$19,000.00	1.00000	-$19,000.00
	1	Yearly Cash Inflow	$0.00	0.93458	$0.00
	2	Yearly Cash Inflow	$670.00	0.87344	$585.20
	2	Terminal Value	$15,261.11	0.87344	$13,329.65
	NPV				-$5,

Tom is analyzing an investment that requires $19,000 today and it produces the first cash flow of $670 in two years (year 2). Cash flow is expected to grow at 2.5% a year after year 2, until eternity....

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