Assume that a firm's Foreign Direct Investment (FDI) strategy has a required rate of return of 20% p. a. The initial investment is $2,000,000, and the firm expects end-of-year earnings of $1,250,000 each year for three years. What is the net present value (NPV) of the firm's FDI strategy? a. $2,633,102 b. $2,962,963 c. $3,750,000 d. $1,750,000

Net Present value of FDI is $633,102.

Explanation:

Net present value is the net of present value of all cash inflow or outflow of a project. It measure the net outcome of a project in current value terms. All the cash flows are discounted using a required rate of return.

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