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Hathaway March 2020

AAliyya3y ago
Hello sir, For the part a ii and iii) of this question, when calculating NPV, why do we need to deduct the $10.72 from the expected Npv calculation? I thought that we had to add the 10.72 (pv of year 1) to the NPV of years 2 to 5.. Can you please explain sir?
John MoffatJohn MoffatTutor3y ago#1
10.72 is the PV of the initial investment and is therefore negative and is subtracted from the PV of the later inflows.
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