Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 13, Problem 5P
To determine

The implied internal rate of return (IRR).

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b)    Adagio Corporation has return on equity (ROE) of 20% and its plowback ratio is p.  The ROE and the plowback ratio are expected to stay the same in all future periods.  The company's earnings are expected to be £4 per share next year.  The cost of capital is 15%.  What is the present value of growth opportunities of this corporation as a function of p?  Calculate the present value of its growth opportunities for p = 30%.
Hua Xing runs a lawn care service. Buying an additional riding lawn mower will cost $3,000 but would allow her firm to earn $1,000 of additional revenue each year for the next four years. She expects marginal efficiency of capital to be at least 10%. Which statement is an accurate description of this investment opportunity? a) Hua Xing should make the investment because turning $3,000 into $4,000 provides a rate of return of 33%. b) Hua Xing should not make the investment because it has a negative net present value. c) Hua Xing should not make the investment because it provides only a 5.16% return on investment. Od) Hua Xing should make the investment because the internal rate of return exceeds 10%.
An analyst is evaluating the possibility of investing in China, Italy, Mexico, or Brazil. What are the equity and fixed-income investment opportunities in these countries based on the following events? 1. The Chinese government announced a spending plan of $1.2 trillion or 13 percent of GDP. In addition, the central bank of China eased monetary policy, resulting in a surge of lending.
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