What is net present value of investment

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If John agrees to pay Sarah $1,000 five years from now and you assume an interest rate of 5%, what is that money worth today?

If John agrees to pay Sarah $1,000 today, assuming Sarah can invest that money at 5%, what will it be worth in 5 years?

Sarah won the lottery. She has two choices of how she can be paid. The state lottery people will either pay her $1,000,000 today or pay her $75,000 a year for 20 years. Assuming an interest rate of 6%, which is the better option financially?

Dr. John Davis has decided to purchase a new lab machine. He has calculated that he will earn an additional incremental income of $50,000 a year over the life of the machine (5 years). The machine costs $150,000. Assume an interest cost of 7%. What is the payback period? What is the Net Present Value of the investment?

Reference no: EM133306404

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