An analyst estimates that an initial investment of 500,000 in a venture capital project will pay 4,000,000 at the end of 5 years if the project succeds and the probability the projects survives to the end of the project is 25% percent. Required rate of return is 19 percent. The expected NPV of the project is: a. 5000 b. 128,000 c. 2,125,000 d. 2,014,000
Hmm…I get a negative number…
same here , - 80,950 to be precise ???
i got (80950) also where is this q from?
I am getting the same (80950). I guess some flaws in question itself. Any thoughts?
80950 for me too… - Dinesh S
-80,950.63 for me too.
Yes, the question is nonsense. move on.
NPV=-500,000+(5,000,000*0.25)/1.19^5= -80,950.63 Negative number.
looks like an example from CFAI practice exam. it should be $6,000,000 instead of $4,000,000. then NPV is 128,574 and the answer is B