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Scott
Scott, MIT Graduate
Category: Finance
Satisfied Customers: 17710
Experience:  I manage my own money -- stocks, bonds, 401k, etc.
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What is the NPV of a project that costs $100,000 and ...

Resolved Question:

What is the NPV of a project that costs $100,000 and returns $50,000 annually for three years if the opportunity cost of capital is 14%
Submitted: 8 years ago.
Category: Finance
Expert:  Scott replied 8 years ago.
Hi there,

Don't forget the other answer I gave you at the bottom of this thread: http://finance.justanswer.com/questions/172s5-pretax-cost-debt-firm-35-tax

Now this one...

Remember that:
PV = FV/(1+r)^t

Add up the costs and the PV of the returns:

-100000 + 50000/(1+0.14)^1 + 50000/(1+0.14)^2 + 50000/(1+0.14)^3

= 16081.60

Let me know if you have any questions,
Scott
Scott and other Finance Specialists are ready to help you
Customer: replied 8 years ago.
how do I give my quetion directly to you? I like working with you on these.
Expert:  Scott replied 8 years ago.
Hi there,

Glad to hear it :)

You can post your question here in a reply to me. If I can answer it, I will. If not, I'll ask you to make a new thread so that anyone can answer!

-Scott
Customer: replied 8 years ago.
What would you estimate to be the required rate of return for equity investors if a stock sells for $40 and will pay a $4.40 dividend that is expected to grow at a constant rate of 5%?
Expert:  Scott replied 8 years ago.
Hi there,

I'm assuming that the 4.40 is the next dividend.

The formula for this is:
Value = Next Dividend / (Required Return - Dividend Growth)

Plug in what we know:
40 = 4.4 / (r - 0.05)

Multiply:
40(r-0.05) = 4.4

Divide by 40:

r-0.05 = 0.11

Add 0.05:
r = 0.16
r = 16%

Let me know if you have any questions,
Scott
Scott and other Finance Specialists are ready to help you