4. Two investments, A and B, produce a continuous income stream of 3%, compounded continuously. The rate of flow of income from investment A is f(t) = 3000e0.04t and the rate of flow of income from investment B is expected to be g(t) = 5000. (a) Find the total income produced by each of the two investments over the 7-year period. (b) Find the future value, the accumulated amount of money flow, of each

4. Two investments, A and B, produce a continuous income stream of 3%, compounded continuously. The rate of flow of income from investment A is f(t) = 3000e0.04t and the rate of flow of income from investment B is expected to be g(t) = 5000. (a) Find the total income produced by each of the two investments over the 7-year period. (b) Find the future value, the accumulated amount of money flow, of each

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,700 and will produce cash flows as follows: End ofYear Investment A B 1 $ 9,300 $ 0 2 9,300 0 3 9,300 27,900 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is: Multiple Choice $(18,344). $8,679. $3,644. $46,244. $13,200
Returns of a Single Asset. Suppose you have invested in 2 assets whose annual returns are shown in the following table. If you invest $1000 in each asset: What will be the value of each asset at the end of year 5? What is the single annual rate which would yield the same value at the end of year 5? (meaning, what is the geometric average annual rate of return?) Year Asset A Asset B 1 -6.01% -9.98% 2 -10.27% 12.30% 3 13.75% 18.15% 4 24.31% -1.69% 5 20.88% 5.00% please use excel
The value of Maria's investments increased by 20% in the first year and by a further 10% in the second year. The value of Laura's investments grew 10% in the first year, followed by a gain of 20% in the second year. Both Maria and Laura started out with a $10,000 investment. Find Maria's and Laura's increase. Maria's increase $ Laura's increase $ Whose investment increased more in the 2-year period? answer a, b, or c! a. Maria's investment increased more. b. Laura's investment increased more. c. Both investments increased equally.
3. If a capital investment is $28,752.7 and equal annual cash inflows are 69,943.5, state the internal rate of return factor rounded to two decimal places.
REQUIRED Study the information given below and answer the following questions: 1. Calculate the Payback Period (expressed in years, months and days). 2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value. 5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
a) If the firm’s cost of capital is 8 percent which investment should the firm make according to net present value? Explain. b) If the firm’s cost of capital is 8 percent what is the internal rate or return (IRR) for the two investments? Which investment should the firm make? Explain.
Q1 (A). An investment of $100 produces rate of return as follows In year 1: a gain of 10 percent In year 2: a loss of percent In year 3: a loss of 8 percent In year 4: a gain of 3 percent. Calculate the value of the investment at the end of the fourth year and calculate the mean annual rate of return.
The present worth of a multiyear investment with all positive cash flows (incomes) other than the initial investment is PW = $13,000 at MARR = i%. If MARR changes to (i + 1)%, the present worth will be:
Pena Company is considering an investment of $27,215 that provides net cash flows of $8,400 annually for four years.(a) If Pena Company requires a 8% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) Based on net present value, should Pena Company make this investment?
Three investments cost $7,000 each and have the following cash flows. Rank them on the basis of their payback periods. Round your answers to one decimal place. Year A B C 1 $ 2,700 $ 3,700 $ 0 2 2,700 2,800 500 3 2,700 2,200 1,000 4 2,700 1,700 2,200 5 2,700 1,000 4,700 Payback for A: years Payback for B: years Payback for C: years Based on the payback periods, should be chosen.
This question is based on the following information: Each of the three independent investments below has a life of 10 years. The cost of capital for the 3 investments is 14%. The PV of an annuity of P 1 for 10 years at 14% is 5.216. Amount (O) Annual cash inflows (I) Net present value (NPV) Investment A P449,400 P 100,000 ? Investment B ? 70,000 13,800 Investment C 198,208 ? 36,512 The annual cash income for investment C isa. 45,000b. 161,696c. 162,906d. 234,720
Suppose that an amount in Kina, is invested in a private financial institution, with interest compounded continuously at 8% per year. a). Write the equation in terms of P0 and 0.08 where P0 is the starting amount invested. And the final balance in the account is denoted with variable P b). Suppose that K2000 is invested. What is the total amount in the account after 3years? c). How many years will it take to have more then the invested amount

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