Chapter 4: Net Present Value - Finance Department

The cost of the car 12 years from today will be $80,000. To find the rate of interest such that your $10,000 investment will pay for the car, set the FV of your investment equal to $80,000. FV = C0 (1+r)12. $80,000 = $10,000 (1+r)12. Solve for the interest rate, r. 8 = (1+r)12. 0.18921 = r. The interest rate required is 18.921%. ................
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