# Math Help - Finance related question

1. ## Finance related question

Initial cash flow, C0 = -10,000 and cash flow in Year 1, C1 = +18,000.......What is the NPV and what is the Rate of Return, with a Opportunity Cost of capital of 20%???

Thanks!

2. Originally Posted by njrocket
Initial cash flow, C0 = -10,000 and cash flow in Year 1, C1 = +18,000.......What is the NPV and what is the Rate of Return, with a Opportunity Cost of capital of 20%???

Thanks!
Just discount the cash flows into todays dollars. The first one is already in todays dollars, the cash flow in one year needs to be discounted back one year.

$NPV = -10000 + \frac{18000}{1.20}$

3. Originally Posted by jass10816
$NPV = -10000 + \frac{18000}{1.20}$
Okay, thanks alot, i see what you mean. What would be the formula for the Return?

4. By rate of return do you mean IRR or Return on your $10,000 investment. IRR is the opportunity cost of capital that makes NPV = 0, so solve $0 = -10000 + \frac{18000}{1+IRR}$. If you mean return on investment, I think you just need to do $\frac{\frac{18000}{1.20}}{10000}-1$ 5. Originally Posted by jass10816 By rate of return do you mean IRR or Return on your$10,000 investment. IRR is the opportunity cost of capital that makes NPV = 0, so solve $0 = -10000 + \frac{18000}{1+IRR}$. If you mean return on investment, I think you just need to do $\frac{\frac{18000}{1.20}}{10000}-1$

All it says is rate of return, where its profit divided by investment.....The investment would be the 10,000....but how do you figure out the profit?

6. The profit in nominal terms is 18000-10000 = 8000.

I am 18 years old and I have been practicing spread betting in demo accounts for months and I'm quite good at it. I only have a couple of grand to start though, but I think I would need more money to stand a chance at it, say £10-15k. The reason I think having this much would be best is because the demo has this amount as a starting balance. How could I raise finance for it? Could I work, or trade spot-forex for a year as I'm quite good at that to make the moeny I need? Please help/advise. Thanks.
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8. Are you serious?

9. I assumed it was a spambot

10. Originally Posted by SpringFan25
i think hes serious. Did i mention i am just waiting for my \$1m from nigeria?
Geeezzzzzzzzz...I'm jealous: I'm waiting for a lesser (800,000)USD inheritance from some relative...