Two investments have the following pattern of expected returns:Investnent AYear 1$5, 100Year 2$10,100Year 3Year 4Year 4 (Sale)$121,000STCF$12,100$15,100Investment BYear 1$2,100Year 2$4,100Year 3$1,100Year 4Year 4 (Sale)$181,000BTCF$5,100Investment A requires an outlay of $111,000 and Investment B requires an outlay of $121,000.Required:a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCF, and BTCF, what proportions of the BTIRR would be represented by each?c. Which investment would be preferable? picte LIIS question by entering your answers in theRequired ARequired BRequired CWhat is the BTIRR on each investment? (Round your answers toInvestment AInvestment BBTIRR%%Required ARequired ARequired BRequired CIf the BTIRR were partitioned based on BTCF, and BTCF3: what proportions of the BTIRR would be represented by each? (Donot round intermediate calculations. Round your answers to the nearest whole number.)Investment AInvestment BBTIRR based on BTCF.BTIRR based on BTCFS< Required ARequired C >Required ARequired BRequired CWhich investment would be preferable?Which investment would be preferable?< Required BRequired C

BTIRR is the before tax internal rate of return of the cash flows. It is the rate at which the net…

Two investments have the following pattern of expected retuns: Year 1 $5,100 Year 2 $10,100 Investment A Year 3 $12,100 Year 4 $15,100 Year 4 (Sale) $121,000 BTCF Year 1 $2,100 Investment B Year 3 $1,100 Year 2 Year 4 $5,100 Year 4 (Sale) $161,000 BTCF $4,100 Investment A requires an outlay of $11.000 and Investment B requires an outlay of $121.000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCF, and BTCF what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?

Two investments have the following pattern of expected retuns: Year 1 $5,100 Year 2 $10,100 Investment A Year 3 $12,100 Year 4 $15,100 Year 4 (Sale) $121,000 BTCF Year 1 $2,100 Investment B Year 3 $1,100 Year 2 Year 4 $5,100 Year 4 (Sale) $161,000 BTCF $4,100 Investment A requires an outlay of $11.000 and Investment B requires an outlay of $121.000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCF, and BTCF what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?

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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Two investments have the following pattern of expected returns: Investment A Year 1 Year 2 Year 3 Year 4 Year 4 (Sale) BTCF $5,000 $10,000 $12,000 $15,000 $120,000 Investment B Year 1 Year 2 Year 3 Year 4 Year 4 (Sale) BTCF $2,000 $4,000 $1,000 $5,000 $180,000 Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCFo and BTCFs' what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?
The matrix below contains payoffs and their associated probabilities for four alternative investments, each requiring the same initial cash outlay. Investment Payoff Matrix I1 -$500 $190 $300 I2 -$200 $ 50 $300 I3 -$300 $100 $250 I4 -$ 40 $ 70 $180 Probabilities 0.2 0.5 0.3 The investment with the largest expected payoff is a. I3 b. I2 c. I4 d. I1
An investment of GH¢10000 returns GH¢3000 at the end of years 1 and 2 and GH¢3500 at the end of years 3 and 4. Calculate the IRR.
You must choose between two investments, G and W. The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment G Investment W NPV –12 000 40 000 PI 0,985 1,053 IRR 20% 24% Which investment(s) should you choose, considering all the above criteria, if the cost of capital is equal to 21% per year
Calculate the EAR of the following investment, entered as a percentage (Example: if your answer is 0.145, enter 14.5) Year Number Cashflow 0 -11400 1 3500 2 3000 3 3100 4 2800 Your Answer:
You have been given the expected return data shown in the first table on three assets—F, G, and H—over the period 2018-2021 Year Asset F Asset G Asset H 2019 5 12 12 2020 10 9 7 2021 13 21 4 2022 6.5 6 10.5 Using these assets, you have isolated the three investment alternatives shown in the following table. Alternative Investment 1 100% of asset G 2 40% of asset F and 60% of asset G 3 50% of asset F and 50% of asset H Calculate the expected return over the 4-year period for each of the three alternative Calculate the standard deviation of returns over the 4-year period for each of the three alternatives. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives. On the basis of your findings, which of the three investment alternatives do you recommend? Why?
The possible rates of return of two assets, A and B, under different economic conditions are given below: Economic Situation Probability Return of Asset A Return of Asset B Recession 0.2 10% 6% Stable 0.5 14% 15% Growth 0.3 20% 11% An investor places 50% of his funds in Asset A and 50% in Asset B. [Note: you may use correlation between A and B as 0.2401] Required: (i)Calculate the risk and expected return for each asset. (ii)Calculate the risk and expected return of the investor’s 2-assets portfolio. (iii) What do you understand by total risk?
Returns. What are the returns on the following investments, E ? ..... Original Cost of Investment Selling Price of Investment Distributions Investment Received Percent Return CD $800 $810 $0 % (Round to two decimal places.)
Calculate the APR of the following investment, entered as a percentage (Example: if your answer is 14.5%, enter 14.5 and not 0.145) Year Number Cashflow 0 -11000 1 3000 2 3500 3 2900 4 2800
Which of the following investments has a higher present value, assuming the same (strictly positive) interest rate applies to both investments? Investment X Investment Y $5,000 $7,000 $9,000 $11,000 Year 1 $11,000 $9,000 $7,000 $5,000 2 3 4 Select one: a. Investment X has a higher present value. b. Investment Y has a higher present value. c. Investment X and Investment Y have the same present value, since the total of the cash flows is the same for both d. No comparison can be made-we need to know the interest rate to calculate the present value
Daymore plc is currently considering three investment opportunities. The following is the details of the investments:-Project A:-1. initial outlay $80m2. Future net inflows Year 1: $190mYear 2: $10mProject B:-1. initial outlay $140m2. Future net inflows Year 1: $180mYear 2: $120mProject C:-1. initial outlay $90m2. Future net inflows Year 1: $10mYear 2: $220mThe company has a capital budget that is restricted in the year of the investment and it will not be possible to undertake all three projects in full. The investment opportunities are independent of one another and each project is divisible (that is, it is possible to undertake part of an investment and to receive a pro-rata return). The cost of capital of the company is 12% and the company uses the net present value method of investment appraisal.Required:Calculate and determine the ranking of the three investment opportunities? (The ranking for the first choice, second choice, and third choice is 1, 2, and 3 respectively). Show…
j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year 1 $100, Year 2 $200, Year 3 $400 Year Payment 1 100 2 200 3 400 Rate 8% To find the PV, use the NPV function: Pv= $581.59 Year Payment x (1+ I)^(N- t) = FV 1 100 2 200 3 400

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