-260000 120000 140000 -350000 100000 130000 200000 50000 3 100000 4 50000 The firm has an opportunity cost of capital of 9%, (a) Explain opportunity cost of canital

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
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7. A firm is considering investing in the following two mutually exclusive projects:
Year
A
B
-260000
-350000
100000
120000
140000
2
130000
3
4
100000
50000
200000
50000
The firm has an opportunity cost of capital of 9%,
(a) Explain opportunity cost of capital.
(b) Calculate the net present value (NPV) projects A and B.
(c) Estimate the internal rate of return for projects A and B.
Transcribed Image Text:7. A firm is considering investing in the following two mutually exclusive projects: Year A B -260000 -350000 100000 120000 140000 2 130000 3 4 100000 50000 200000 50000 The firm has an opportunity cost of capital of 9%, (a) Explain opportunity cost of capital. (b) Calculate the net present value (NPV) projects A and B. (c) Estimate the internal rate of return for projects A and B.
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