Ali is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018, her manager has shown her some projects with the following details Option A Investment into a towel business that initially cost $100,000 and then will generate cash inflow of $14000 per year for the next 10 years Option B Investment into a detergent business that initially cost $90,000 and then will generate cash inflow of $10,000 for each of next 12 years. The rate of return associated with both the investments is 11%. Calculate net present value (NPV) and internal rate of return (IRR) of both the investments. Comment on which investment Mrs Alis should pick on the basis NPV and IRR.
Ali is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018, her manager has shown her some projects with the following details Option A Investment into a towel business that initially cost $100,000 and then will generate cash inflow of $14000 per year for the next 10 years Option B Investment into a detergent business that initially cost $90,000 and then will generate cash inflow of $10,000 for each of next 12 years. The rate of return associated with both the investments is 11%. Calculate net present value (NPV) and internal rate of return (IRR) of both the investments. Comment on which investment Mrs Alis should pick on the basis NPV and IRR.
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 9FPE
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Question
Ali is an intelligent business woman. She makes her investments after a very thoughtful process. In January 2018, her manager has shown her some projects with the following details
Option A
Investment into a towel business that initially cost $100,000 and then will generate
Option B
Investment into a detergent business that initially cost $90,000 and then will generate cash inflow of $10,000 for each of next 12 years.
The
- Calculate
net present value (NPV) andinternal rate of return (IRR) of both the investments. - Comment on which investment Mrs Alis should pick on the basis NPV and IRR.
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