Since only one sign change occurs in the net cash flow series, the project is a simple investment, i.e. a unique rate of return (pure investment) W(i) = -2500000 +772500(P/A, i*, 15) + 80000(P/F, i*, 15) = 0 Solving for i i* = 34.46%

Since only one sign change occurs in the net cash flow series, the project is a simple investment, i.e. a unique rate of return (pure investment) W(i) = -2500000 +772500(P/A, i, 15) + 80000(P/F, i, 15) = 0 Solving for i i* = 34.46%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 10P

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show the steps
a. Since only one sign change occurs in the net cash flow series, the project is a simple
investment, i.e. a unique rate of return (pure investment)
PW (i) = -2500000 +772500(P/A, i*, 15) +80000(P/F, i*, 15) = 0
Solving for i
i* = 34.46%

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