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An investment of $115 generates after-tax cash flows of $50 in Year 1, $90 in Year 2, and $150 in Year 3. The required rate of return is 20 percent. The net present value is closest to $92.32. $75.97. $37.27. $92.35.

Answer :

facundobuzzetti

Answer:

The  correct answer is B.

Explanation:

Giving the following information:

An investment of $115 generates after-tax cash flows of $50 in Year 1, $90 in Year 2, and $150 in Year 3.

Rate of return= 20%

To calculate the present value, we need the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf= cash flow

Io= 115

Cf1= 50/ 1.20= $41.67

Cf2= 90/1.2^2= $62.5

Cf3= 150/1.2^3= $86.81

NPV= -115 + (41.67 + 62.5 + 86.81)

NPV= $75.98

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