Solve the following rate of return problems. a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment? b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of return, IRR, on this investment? c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years? Note: Round your answers to 2 decimal places. 7.53 % a. IRR b. IRR c. IRR %

Solve the following rate of return problems. a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment? b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of return, IRR, on this investment? c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years? Note: Round your answers to 2 decimal places. 7.53 % a. IRR b. IRR c. IRR %

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

See similar textbooks

Similar questions

You are considering investing in a security that will pay you $2,000 in 35 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $275 in return for which you receive $2,000 in 35 years. What is the rate of return investors earn on this investment if they buy it for $275?
. Evaluate the following statement:Consider two riskless perpetuities: (i) pays $120 every year; (ii) pays $10 every month. If the rates of returns of the two perpetuities are the same, investors must buy perpetuity (ii) because it makes more interest payments.
Your firm is considering an investment that will cost $750,000 today. The investment will produce cash flows of $250,000 in year 1, $300,000 in years 2 through 4, and $100,000 in year 5. What is the investment's discounted payback period if the required rate of return is 10%? Answer 3.33 years 3.16 years 2.67 years 2.33 years
If you invest $73,300 in a project which yields an annual return of $13,500, how many years will it take to recover your investment if the annual interest rate is 4.5%? a 7 b 9 c. 5 d 8 e. 6
An investment costs $4,000 today. This investment is expected to produce annual cash flows of $1,200, $1,400, $ 1,300 and $1,100, respectively, over the next four years. What is the internal rate of return (IRR) ( or geometric average) on this investment? Question 23 options: 2.43 % 6.25 % 9.72% 31.25%
You are considering an investment in a clothes distributer. The company needs $106,000 today and expects to repay you $124,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 15%. What does the IRR rule say about whether you should invest? What is the IRR of this investment opportunity? The IRR of this investment opportunity is %. (Round to two decimal places.)
Consider an investment that costs 100,000 and has a cash inflow of 30,000 every year for 5 years. The required return is 10% and the required payback is 4 years. What is the discounted payback period? What is the profitability index?
Computing the Present Value of a Single Amount Depp is reviewing an investment that will provide a payout of $108,000 in five years. If Depp considers a 5% interest rate (compounded annually) acceptable, what amount is Depp willing to pay for the investment today? Round your answer to the nearest whole number. Do not use a negative sign with your answer.
If you put up GHC1,250 in a one-year investment and get back GHC1,350. What rate is this investment paying?
Future Value You invest $1,000 today and exect to sell the investment for $2,000 in 10 years. a. Is this a good deal if the investment rate is 6%? b. What if the interest rate is 10%? Why ? Show the calculations in Excel.
You are considering in investing one of the two options: Investment A requires a $175,000 upfront payment and generates $12,000 annually, Investment B requires a $250,000 upfront payment. How much should Investment B generate annually so that the total returns from Investment A and B become equal after 25 years? O None of the others O $15,000 O $9,000 O $75,000 O $3,000
Assume you invest $5,100 today in an investment that promises to return $6,928 in exactly 10 years. a. Use the present-value technique to estimate the IRR on this investment. b. If a minimum annual return of 9% is required, would you recommend this investment? #69 Part 1 a. The IRR of the investment is enter your response here%. (Round to the nearest whole percent.) Part 2 b. If a minimum return of 9% is required, would you recommend this investment? (Select the best choice below.) A. No, because this investment yields less than the minimum required return of 9%. B. Yes, because a minimum required return of 9% does not compensate for an investment that lasts longer than one year. C. No, because a minimum required return of 9% is an arbitrary choice for an investment of this risk level. D. Yes, because this investment yields more than the minimum required return of 9%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS