07cv2Q51 3. an analyst estimates that an initial investment of 500,000 in a venture capital project will pay 4 million at the end of 5 years if the project succeeds and that the probability the project survives to the end of the 5th year is 25%. The required rate of return for the project is 19%. The expected net present value of the venture capital investment is closest to : a. 5,000 b.128, 000 c.2,125,000 d.2,014,000 answer: B. the probability that the venture will pay 4 million at end of 5 years is 25%. The probability of failure is 75%. The expected NPV if project succeeds is 2,014,296. using FV=4,000,000, I=19%, n=5 for a PV of 2,514,296-500,000 =2,014,296 the NPV of project is 25%*(2,014,296)+75%*(-500,000)=128,574 --with input FV=4,000,000, PMT=0,I=19%, n=5 my calculator keeps showing PV @ 1,676,197. Could you verify this?
It’s $1676,197 and Expected NPV value = -$81K
Why does the calc not work out properly if I just do the npv() with the expected payment in year 5, E(Payment) = .25*4,000,00?