Problem:
Turner Video will invest 64500 in a project. The firms cost of capital is 6% The investment will provide the following inflows.
- 18,000
- 20,000
- 24,000
- 28,000
- 32,000
Requirement:
Question 1: If the reinvestment of the net present value method is used what will be the total value of inflows at the end of five years. (assume inflows come at the end of the year)
Question 2: If the firm is able to earn 10% on reinvesment funds what will be the total value of inflows after five years?
Question 3: Which investment assumption is better?
Note: Please show guided help with steps and answer.