Example of Net Present Calculation

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Example of Net Present Calculation
S.SIVARAM, Member
Consider the following two investments:
Investment 1 requires a cash investment of $ 10,000 today and $14,000 two years from now. One year from now this investment will yield $24,000.
Investment 2 requires a cash investment of $ 6,000 today and $1,000 two years from now. One year from now this investment will yield $8,000.
Calculate the NPV and find the better investment. What is your answer?
 

 
You Forgot Discount Rate
Robert Fullsome, Member
You can't solve this problem unless there is a discount rate. I could calculate IRR, but not NPV. Try again.
 

 
Net Present Value Calculation Requires Discount Rate
Jaap de Jonge, Editor
@Robert Fullsome: Thanks for sharing your opinion. I agree Net Present Value calculation requires applying a discount rate to compensate for the cost of capital. Without a discount rate you can not calculate the proper NPV of any investment.
 

 







 

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