Paul makes one investment of 500 on January 1, 2005 and collects 600 on January 1, 2007 for an annual effective yield of X%. Toby invests 100 on January 1, 2005, invests another 100 on January 1, 2006, and collects an amount Z on January 1, 2007 for an annual effective yield of Y%. The combination of Paul's and Toby's cash flows, produces an annual effective yield of 10%. Calculate Y% - X%. (A) 0% (B) 1% (C) 2% (D) 3% (E) 4%

Paul makes one investment of 500 on January 1, 2005 and collects 600 on January 1, 2007 for an annual effective yield of X%. Toby invests 100 on January 1, 2005, invests another 100 on January 1, 2006, and collects an amount Z on January 1, 2007 for an annual effective yield of Y%. The combination of Paul's and Toby's cash flows, produces an annual effective yield of 10%. Calculate Y% - X%. (A) 0% (B) 1% (C) 2% (D) 3% (E) 4%

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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Gomez is considering a $240,000 investment with the following net cash flows. Gomez requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows $65,000 $45,000 $79,000 $167,000 $44,000 (a) Compute the net present value of this investment. (b) Should Gomez accept the investment?
A mail order business will generate cash flows of $9,000 at the end of each of the next 3 years, $19,000 at the end of year 4, $25,000 at the end of year 5 and $45,000 at the end of year 6. Given that other investments of equal risk earn 8% per annum, calculate the present value and future value of this investment
Smith Investors places $50,000 in an investment fund. One year after making the investment, Smith receives $7,500 and continues to receive $7,500 annually until 10 such amounts are received. Smith receives nothing further until 15 years after the initial investment, at which time $50,000 is received. Over the 15-year period, determine the internal rate of return and whether or not this is a desirable investment if MARR = 10%.
Pena Company is considering an investment of $27,215 that provides net cash flows of $8,400 annually for four years.(a) If Pena Company requires a 8% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) Based on net present value, should Pena Company make this investment?
An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
Gomez is considering a $185,000 investment with the following net cash flows. Gomez requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. (a) Compute the net present value of this investment. (b) Should Gomez accept the investment? Complete this question by entering your answers in the tabs below. Compute the net present value of this investment. Note: Round your answers to the nearest whole dollar.
Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows . $60,000 $40,000 $70,000 $125,000 $35,000 $330,000 assume that Beyer requires a 10% return on its investments. Compute the net present value of this investment. (Round to the nearest dollar.) Should Beyer accept the investment?
ou are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment End of Year A B C 1 $ 2,000 $ 2,000 $ 6,000 2 3,000 2,000 6,000 3 4,000 2,000 (6,000) 4 (5,000) 2,000 (6,000) 5 5,000 6,000 16,000 a. What is the present value of investment A at an annual discount rate of 13 percent? b. What is the present value of investment B at an annual discount rate of 13 percent? c. What is the present value of investment C at an annual discount rate of 13 percent?
Crane Telecommunications Corp. has made an investment in another company that will guarantee it a cash flow of $24,500 each year for the next five years. If the company uses a discount rate of 17 percent on its investments, what is the present value of this investment? (Round factor values to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,400 and will produce cash flows as follows: End ofYear Investment A B 1 $ 8,400 $ 0 2 8,400 0 3 8,400 25,200 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment B is:
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Perez Company is considering an investment of $26,945 that provides net cash flows of $8,500 annually for four years.(a) What is the internal rate of return of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)(b) The hurdle rate is 7%. Should the company invest in this project on the basis of internal rate of return?

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