A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful life is 9 years. Expenses are estimated to be $500 semiannually. If the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (IRR) of this investment? The IRR is compounded semiannually. O a. IRR = 3% semiannual O b. IRR = 12% semiannual Oc. IRR = 8.02% semiannual Od. IRR = 6% semiannual

A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful life is 9 years. Expenses are estimated to be $500 semiannually. If the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (IRR) of this investment? The IRR is compounded semiannually. O a. IRR = 3% semiannual O b. IRR = 12% semiannual Oc. IRR = 8.02% semiannual Od. IRR = 6% semiannual

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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Question

A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful life is 9 years. Expenses are estimated to be $500
semiannually. If the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (IRR) of this investment? The IRR is compounded semiannually.
O a. IRR = 3% semiannual
O b. IRR = 12% semiannual
O c. IRR = 8.02% semiannual
O d. IRR = 6% semiannual

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