(d) projects. Calculate the Internal Rate of Return and NPV for each of the three Which projects should the corporation undertake?

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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Hi, 

I need with part C and D please.

SECTION A
Answer TWO out of three questions from section A.
1. Consider a world with two points in time, to and t₁. A corporation expects revenues of
£1.0 million at to and £1.0 million at t₁.
The corporation has three new projects it can invest in. The investments at to and
payoffs at t₁ are given in the table below. Assume that money can be borrowed and lent
to the bank freely at 6% over this period.
Project Investment (£) Payoff (£)
A
B
C
600,000
500,000
700,000
projects.
624,000
540,000
770,000
Explain what the Fisher Separation Theorem is.
Explain why Fisher Separation Theorem does not hold if lending rates
are not equal to borrowing rates.
Calculate the Internal Rate of Return and NPV for each of the three
Which projects should the corporation undertake?
Assume the firm pays out dividends of £0.8 million at to. What is the
largest amount that the firm can distribute in dividends at t₁?
Transcribed Image Text:SECTION A Answer TWO out of three questions from section A. 1. Consider a world with two points in time, to and t₁. A corporation expects revenues of £1.0 million at to and £1.0 million at t₁. The corporation has three new projects it can invest in. The investments at to and payoffs at t₁ are given in the table below. Assume that money can be borrowed and lent to the bank freely at 6% over this period. Project Investment (£) Payoff (£) A B C 600,000 500,000 700,000 projects. 624,000 540,000 770,000 Explain what the Fisher Separation Theorem is. Explain why Fisher Separation Theorem does not hold if lending rates are not equal to borrowing rates. Calculate the Internal Rate of Return and NPV for each of the three Which projects should the corporation undertake? Assume the firm pays out dividends of £0.8 million at to. What is the largest amount that the firm can distribute in dividends at t₁?
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