As the investment manager, you are faced with the problem of choosing between two investment projects (X and Y). Each project costs ¢40,000, but investment X pays ¢25,000 for first year, 10,000 for the second year and 15,000 for the third year. Investment Y pays ¢15,000 for first year, 25,000 for second year and 10,000 for third year. If your required return is 10% per annum, which of the two projects will you choose and why?
As the investment manager, you are faced with the problem of choosing between two investment projects (X and Y). Each project costs ¢40,000, but investment X pays ¢25,000 for first year, 10,000 for the second year and 15,000 for the third year. Investment Y pays ¢15,000 for first year, 25,000 for second year and 10,000 for third year. If your required return is 10% per annum, which of the two projects will you choose and why?
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
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QUESTION THREE
- As the investment manager, you are faced with the problem of choosing between two investment projects (X and Y). Each project costs ¢40,000, but investment X pays ¢25,000 for first year, 10,000 for the second year and 15,000 for the third year. Investment Y pays ¢15,000 for first year, 25,000 for second year and 10,000 for third year. If your required return is 10% per annum, which of the two projects will you choose and why?
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