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2020 A+$18,000 in bank B+ $20,000 in bank C+$13,000 in bank A+B+$8,000 in bank B+C+$3,000 in bank A+C+$1,000 in bank. $130,876 $137,652 $170, 394 $147,161 $186,679 $179.904 $152,092 $158, 387 $203,205 $189,112 $240, 224 $233,929

2020 A+$18,000 in bank B+ $20,000 in bank C+$13,000 in bank A+B+$8,000 in bank B+C+$3,000 in bank A+C+$1,000 in bank. $130,876 $137,652 $170, 394 $147,161 $186,679 $179.904 $152,092 $158, 387 $203,205 $189,112 $240, 224 $233,929

Essentials Of Investments
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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How did they compute the 20% Future Value?

20% A+$18,000 in bank B+ $20,000 in bank $130,876 $137,652 $170,394 $147,161 $186,679 $152,092 $158, 387 C+$13,000 in bank A+B+$8,000 in bank B+C+$3,000 in bank A+C+$1,000 in bank. $203,205 $189,112 $240,224 $233,929 $179,904
Transcribed Image Text:20% A+$18,000 in bank B+ $20,000 in bank $130,876 $137,652 $170,394 $147,161 $186,679 $152,092 $158, 387 C+$13,000 in bank A+B+$8,000 in bank B+C+$3,000 in bank A+C+$1,000 in bank. $203,205 $189,112 $240,224 $233,929 $179,904
A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4, 281 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit where they will earn 15%. (a) Identify six combinations of project investments and a bank deposit which exhaust the budget. (b) Which of the above combinations should the firm choose: when the reinvestment rate is 15%? when the reinvestment rate is 20%? (i) (ii) Explain your answer and show your calculations (spreadsheet printout is acceptable as long as entries are clearly labeled).
Transcribed Image Text:A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4, 281 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit where they will earn 15%. (a) Identify six combinations of project investments and a bank deposit which exhaust the budget. (b) Which of the above combinations should the firm choose: when the reinvestment rate is 15%? when the reinvestment rate is 20%? (i) (ii) Explain your answer and show your calculations (spreadsheet printout is acceptable as long as entries are clearly labeled).
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