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    Can anyone help me answer this question?
    Suppose an investment opportunity with a cash flow of $3000 each year for the first 3 years, and $2000 from year 4 in perpetuity. With initial investment of $18000. What is the NPV of the investment if r=10% ?

    I know that you have to derive the first 3 years and then at year 3 using the formula C/r, then derive the PV. But i still get the wrong answer.
    Help? ;S
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    (Original post by adusiiaa0069)
    Can anyone help me answer this question?
    Suppose an investment opportunity with a cash flow of $3000 each year for the first 3 years, and $2000 from year 4 in perpetuity. With initial investment of $18000. What is the NPV of the investment if r=10% ?

    I know that you have to derive the first 3 years and then at year 3 using the formula C/r, then derive the PV. But i still get the wrong answer.
    Help? ;S
    I've moved this to the Accounting and finance study help forum
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    (Original post by adusiiaa0069)
    Can anyone help me answer this question?
    Suppose an investment opportunity with a cash flow of $3000 each year for the first 3 years, and $2000 from year 4 in perpetuity. With initial investment of $18000. What is the NPV of the investment if r=10% ?

    I know that you have to derive the first 3 years and then at year 3 using the formula C/r, then derive the PV. But i still get the wrong answer.
    Help? ;S
    Still need help with this question?

    Remember that the perpetuity itself needs to be discounted back to year 1 - this is where you are most likely going wrong.
 
 
 
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