EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 24, Problem 9CP
Summary Introduction
To calculate:The
Introduction:
Internal rate of return: It is supposed to the discounting rate when the
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A 2-year investment of $2,000 results in a cash flow of $150 at the end of the first year and another cash flow of $150 at the end of the second year, in addition to the return of the original investment. What is the internal rate of return on the investment?
What is the internal rate of return (IRR) of an investment that requires an initial investmen of $11,000 today and pays $15,400 in one year's time?
When an investment’s annual net cash inflows are equal every year, the investment’s payback period can be calculated as: (See your Chapter 25 notes, page 2)
When an investment’s annual net cash inflows are equal every year, the investment’s payback period can be calculated as: (See your Chapter 25 notes, page 2)
Initial cost of the investment minus the annual net cash inflow
Average amount of the investment divided by the average annual net income
Initial cost of the investment divided by the annual net cash inflow
Present value of net cash inflow divided by the initial cost of the investment
Future value of net cash inflow divided by the initial cost of the investment
Present value of the net cash inflow minus the initial cost of the investment
Annual net cash inflow minus the initial cost of the investment
Average annual net income divided by the average amount of the investment
Chapter 24 Solutions
EBK INVESTMENTS
Ch. 24 - Prob. 1PSCh. 24 - Prob. 2PSCh. 24 - Prob. 3PSCh. 24 - Prob. 4PSCh. 24 - Prob. 5PSCh. 24 - Prob. 6PSCh. 24 - Prob. 7PSCh. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Prob. 10PS
Ch. 24 - Prob. 11PSCh. 24 - Prob. 12PSCh. 24 - Prob. 13PSCh. 24 - Prob. 14PSCh. 24 - Prob. 15PSCh. 24 - Prob. 16PSCh. 24 - Prob. 17PSCh. 24 - Prob. 18PSCh. 24 - Prob. 19PSCh. 24 - Prob. 20PSCh. 24 - Prob. 21PSCh. 24 - Prob. 22PSCh. 24 - Prob. 1CPCh. 24 - Prob. 2CPCh. 24 - Prob. 3CPCh. 24 - Prob. 4CPCh. 24 - Prob. 5CPCh. 24 - Prob. 6CPCh. 24 - Prob. 7CPCh. 24 - Prob. 8CPCh. 24 - Prob. 9CPCh. 24 - Prob. 10CPCh. 24 - Prob. 11CPCh. 24 - Prob. 12CPCh. 24 - Prob. 13CPCh. 24 - Prob. 14CP
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- You have been depositing money into an account yearly based on the following investment amounts, rates and times. What is the value of that Investment account at the end of that period?arrow_forwardIf a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?arrow_forwardFalkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?arrow_forward
- Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income: The payback period of this project will be: a. 2.5 years. b. 2.6 years. c. 3.0 years. d. 3.3 years.arrow_forwardMason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?arrow_forwardAn investment will pay $150 at the end of each of the next 3 years, $300 at the end of Year 4, $600 at the end of Year 5, and incur a $500 cost at the end of Year 6. If other investments of equal risk earn 6.7% annually, what is this investment’s present value? Its future value?arrow_forward
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- Consider an initial investment of $100 using an accumulation function which is a second-degree polynomial. You are given that the future values of this investment at the end of six months and the first year are $120 and $150, respectively. Determine the present value of 100$ which is paid at time -15.arrow_forwardA present investment of tk 500,000 is expected to yield receipts of tk70, 000 a year for 15 years. What is the appropriate rate of return that will be obtained on this investment? (Hint: apply linear interpolation if necessary).arrow_forwardAn investment will pay $150 at the end of each of the next 3 years, $300 at the end of Year 4, $600 at the end of Year 5, and incur a $500 cost at the end of Year 6. If other investments of equal risk earn 6.7% annually, what is this investment’s present value?arrow_forward
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