Please help me answer parts D and F ONLY.Thank you! Analytical problems11 Fun with IRR. Suppose you have just graduated from college and are deciding on acareer. Your four career options, along with your salary in each of the four earningperiods, are displayed in Table 5.3. Assume that any career will only last four periodsbefore retirement.Table 5.3. Career options and salary information for Exercises 11 and 12.SalaryОccupationPeriod 0Period 1Period 2Period 3Ophthalmologist-511012Accountant34Starving artist1111DNDSports superstar15a Assume your discount factor 8 =0.95. Interpret this assumption.b Find the value of the interest rate r that corresponds to your discount factor.c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal-mologist and of becoming an accountant. Which career do you prefer?d Will the internal rate of return (IRR) for becoming an ophthalmologist as opposed%3Dto an accountant be greater or less than your answer to Exercise 11(b)?e Now assume 8 = 0.6. Calculate both the corresponding interest rate and thenet present value (NPV) of becoming an ophthalmologist and of becoming anaccountant. Now which job do you prefer?f Find the IRR for becoming an ophthalmologist as opposed to an accountant. Thatis, find a value of r* that equates these two NPVS. [Hint: you will probably want touse a graphing calculator or an online equation solver to find r*.]Moro fun uith IRP Pefer to Tahle 5 3 about the payouts available at different jobs.%3D2.

NPV stand for Net present value which refers to the difference between the present value of cash…

11 Fun with IRR. Suppose you have just graduated from college and are decio career. Your four career options, along with your salary in each of the four periods, are displayed in Table 5.3. Assume that any career will only last fou before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Occunation Period 0 Period 1 Period 2 Perios

11 Fun with IRR. Suppose you have just graduated from college and are decio career. Your four career options, along with your salary in each of the four periods, are displayed in Table 5.3. Assume that any career will only last fou before retirement. Table 5.3. Career options and salary information for Exercises 11 and 12. Salary Occunation Period 0 Period 1 Period 2 Perios

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter1: Understanding The Financial Planning Process

Section: Chapter Questions

Problem 8FPE

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Question

Please help me answer parts D and F ONLY.

Thank you!

Analytical problems
11 Fun with IRR. Suppose you have just graduated from college and are deciding on a
career. Your four career options, along with your salary in each of the four earning
periods, are displayed in Table 5.3. Assume that any career will only last four periods
before retirement.
Table 5.3. Career options and salary information for Exercises 11 and 12.
Salary
Оccupation
Period 0
Period 1
Period 2
Period 3
Ophthalmologist
-5
1
10
12
Accountant
3
4
Starving artist
1
1
1
1
DND
Sports superstar
15
a Assume your discount factor 8 =0.95. Interpret this assumption.
b Find the value of the interest rate r that corresponds to your discount factor.
c Assuming 8=0.95, calculate the net present value (NPV) of becoming an ophthal-
mologist and of becoming an accountant. Which career do you prefer?
d Will the internal rate of return (IRR) for becoming an ophthalmologist as opposed
%3D
to an accountant be greater or less than your answer to Exercise 11(b)?
e Now assume 8 = 0.6. Calculate both the corresponding interest rate and the
net present value (NPV) of becoming an ophthalmologist and of becoming an
accountant. Now which job do you prefer?
f Find the IRR for becoming an ophthalmologist as opposed to an accountant. That
is, find a value of r* that equates these two NPVS. [Hint: you will probably want to
use a graphing calculator or an online equation solver to find r*.]
Moro fun uith IRP Pefer to Tahle 5 3 about the payouts available at different jobs.
%3D
2.

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