1. Determine which of the two (2) inveatment projecta your supervisor ahould choose, given a diecount rate of 10% from J P Morgan Chase bank. The firet project generates a profit of USS 100,000 in four (4) years, while the second, a profit of US$ 75,000 in aix yeara. NPV 1 = 100000 (1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) = $316986.55 NPV 2 = 75000 (1+/1.1^6 + 1/1.1^5 + 1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) =$326644.55 The second investment 11 What ia the dizcount rate or proxy of the diacount rate that ahould be uaed? 1.2 Determine the optimal inveztment project at the given dizcount rate? 1.3 Suppose the discount rate at Bank of America, ia 7.5%, which project ahould be chozen.
1. Determine which of the two (2) inveatment projecta your supervisor ahould choose, given a diecount rate of 10% from J P Morgan Chase bank. The firet project generates a profit of USS 100,000 in four (4) years, while the second, a profit of US$ 75,000 in aix yeara. NPV 1 = 100000 (1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) = $316986.55 NPV 2 = 75000 (1+/1.1^6 + 1/1.1^5 + 1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) =$326644.55 The second investment 11 What ia the dizcount rate or proxy of the diacount rate that ahould be uaed? 1.2 Determine the optimal inveztment project at the given dizcount rate? 1.3 Suppose the discount rate at Bank of America, ia 7.5%, which project ahould be chozen.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1.
Determine which of the two (2) investment projecta your supervisor ahould choose, given a diacount rate of
10% from J P Morgan Chase bank. The first project generates a profit of USS 100,000 in four (4) years,
while the second, a profit of US$ 75,000 in six yeara.
NPV 1 = 100000 (1/1.1^4 + 1/1.1^3 + 1/1.1^2+ 1/1.1) = $316986.55
NPV 2 = 75000 (1+/1.1^6 + 1/1.1^5 + 1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) =$326644.55
The second investment
11 What ia the discount rate or proxy of the diacount rate that ahould be uaed?
1.2 Determine the optimal inveatment project at the given diacount rate?
1.3 Suppose the diacount rate at Bank of America, ia 7.5%, which project ahould be chozen.
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