Solved: Opportunity to invest in a business, Finance Basics

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Opportunity to invest in a business

Question:

You have an opportunity to invest in a business that will pay $200,000 in one year, $400,000 in two years, $600,000 in three years and $800,000 in four years. You can earn 12% per year compounded annually on a mutual fund that has similar risk. If it costs $1.2 million to start this business, what is the NPV & should you invest?

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Finance Basics: Opportunity to invest in a business

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