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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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100% A Thu 3:52 PM
|E|0|CO PQ
a G b
EJE x
a
i bookshelf.vitalsource.com/#/books/9781260006520/cfi/6/70!/4/6/18/134/2/2@0:80.1
Update :
E
YouTube Maps
KILLERANDASWE.
VitalSource Books. C A Delightful Buyin. P PaperCut MF : We.
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b. If the machine manufactured by Akron Industries has a payback period of 60 months, what is its cost?
c. Which of the machines is most attractive based on its respective payback period? Should Heartland base its decision entirely on this criterion? Explain your answer.
LO26-1, LO26-3
EXERCISE 26.3
Understanding Return on Average Investment Relationships
Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments.
A
в
D
Investment cost
$50,000 $75,000 $40,000
$?
Estimated salvage value
10,000
15,000
?
2,000
Average estimated net income
9,000
?
6,000 8,000
Return on average investment
?
18%
25%
20%
LO26-3
EXERCISE 26.4
Discounting Cash Flows
Solve for the missing information pertaining to each investment proposal.
Using the tables in Exhibits 26–3 and 26-4, determine the present value of the following cash flows, discounted at an annual rate of 15 percent.
a. $40,000 to be received 20 years from today.
b. $24,000 to be received annually for 10 years.
c. $16,000 to be received annually for five years, with an additional $20,000 salvage value expected at the end of the fifth year.
d. $30,000 to be received annually for the first three years, followed by $20,000 received annually for the next two years (total of five years in which cash is received).
page 1135
LO26-3
https://jigsaw.vitalsource.com/books/9781260006520/epub/OEBPS/chapter26.x.
1,777
MAY
Aa W
白 !!! d 四四回@"
Transcribed Image Text:Chrome File
Edit View History Bookmarks Profiles Tab Window Help
100% A Thu 3:52 PM
|E|0|CO PQ
a G b
EJE x
a
i bookshelf.vitalsource.com/#/books/9781260006520/cfi/6/70!/4/6/18/134/2/2@0:80.1
Update :
E
YouTube Maps
KILLERANDASWE.
VitalSource Books. C A Delightful Buyin. P PaperCut MF : We.
E Reading List
Apps M Gmail
b. If the machine manufactured by Akron Industries has a payback period of 60 months, what is its cost?
c. Which of the machines is most attractive based on its respective payback period? Should Heartland base its decision entirely on this criterion? Explain your answer.
LO26-1, LO26-3
EXERCISE 26.3
Understanding Return on Average Investment Relationships
Foz Co. is considering four investment proposals (A, B, C, and D). The following table provides data concerning each of these investments.
A
в
D
Investment cost
$50,000 $75,000 $40,000
$?
Estimated salvage value
10,000
15,000
?
2,000
Average estimated net income
9,000
?
6,000 8,000
Return on average investment
?
18%
25%
20%
LO26-3
EXERCISE 26.4
Discounting Cash Flows
Solve for the missing information pertaining to each investment proposal.
Using the tables in Exhibits 26–3 and 26-4, determine the present value of the following cash flows, discounted at an annual rate of 15 percent.
a. $40,000 to be received 20 years from today.
b. $24,000 to be received annually for 10 years.
c. $16,000 to be received annually for five years, with an additional $20,000 salvage value expected at the end of the fifth year.
d. $30,000 to be received annually for the first three years, followed by $20,000 received annually for the next two years (total of five years in which cash is received).
page 1135
LO26-3
https://jigsaw.vitalsource.com/books/9781260006520/epub/OEBPS/chapter26.x.
1,777
MAY
Aa W
白 !!! d 四四回@
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- Find the interest rate needed for the sinking fund to reach the required amount. Assume that the compounding period is the same as the payment period. $29,488 to be accumulated in 5 years; quarterly payments of $1275. %- The interest rate needed is approximately (Type an integer or decimal rounded to two decimal places as needed.)arrow_forwardFind the book value at the beginning and end of each year by single line, double declining balance, sum-of-the-years digits, and sinking fund at 6% methods for an asset with initail cost of $2500 and with salvage of $1100 in six years.arrow_forwardAssume that you purchase a property for $200,000 and it generates annual cash flows of $30,000 in years 1-3; and $45,000 in years 4&5. You are able to sell it at the end of year 5 for $400,000. Calculate the IRR for this investment property.arrow_forward
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