Suppose that an investment advisor offers you to invest your hard earned money in a project that has the following cash flows (the subscript denotes the time index corresponding to years from today so that subscript 2, for example, denotes the point in time two years from now).
C1=200, C2= -250, C3= 300
What is the maximum price that you should be willing to pay for this project knowing that for an alternative project of the same risk you could expect an annual return of 10%?
NPV of an investment equals 200 and something. So should I use then the formula for present value: PV=FT*(1+r)3 (FT= 200 and something) in order to get how much should I invest in this project?
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