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4. For an interest rate of 10% compounded annuálly, evalùate the value of “X" from the cash flows given in table below. 2 |-10,000 + X 1,600 1,700 1,800 1,900 3 5 Year Cash flows

4. For an interest rate of 10% compounded annuálly, evalùate the value of “X" from the cash flows given in table below. 2 |-10,000 + X 1,600 1,700 1,800 1,900 3 5 Year Cash flows

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
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**Interest Rate Problem and Cash Flow Analysis** **Problem Statement:** Evaluate the value of "X" for an interest rate of 10% compounded annually from the cash flows given in the table below. **Cash Flow Table:** - **Year 0:** Cash flow = -10,000 + X - **Year 1:** Cash flow = 1,600 - **Year 2:** Cash flow = 1,700 - **Year 3:** Cash flow = 1,800 - **Year 4:** Cash flow = 1,900 - **Year 5:** Cash flow = 3,500 **Overview:** The table presents cash flows over a 5-year period, with Year 0 being the initial investment or cost adjusted by an unknown variable X. The succeeding years depict positive cash inflows starting from Year 1 up to Year 5. The task is to determine the value of X that results in a net present value (NPV) where the sum of the present values of these cash flows equals zero when discounted at an annual interest rate of 10%.
Transcribed Image Text:**Interest Rate Problem and Cash Flow Analysis** **Problem Statement:** Evaluate the value of "X" for an interest rate of 10% compounded annually from the cash flows given in the table below. **Cash Flow Table:** - **Year 0:** Cash flow = -10,000 + X - **Year 1:** Cash flow = 1,600 - **Year 2:** Cash flow = 1,700 - **Year 3:** Cash flow = 1,800 - **Year 4:** Cash flow = 1,900 - **Year 5:** Cash flow = 3,500 **Overview:** The table presents cash flows over a 5-year period, with Year 0 being the initial investment or cost adjusted by an unknown variable X. The succeeding years depict positive cash inflows starting from Year 1 up to Year 5. The task is to determine the value of X that results in a net present value (NPV) where the sum of the present values of these cash flows equals zero when discounted at an annual interest rate of 10%.
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