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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Question
Mrs Alis 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 $200,000 and then will generate
Option B
Investment into a detergent business that initially cost $190,000 and then will generate cash inflow of $20,000 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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