A firm has an opportunity to invest $100,000 in a project that will result revenue of $30,000 per year 7 years. The maintenance would be $800O0 per year and salvage value is $32,000 at end of year 7. What would be rate of return? O=-100000+32000(P/F.i.7)+(30000-8000)* (P/A,i,7) solve for i either using interpolation of excel,
A firm has an opportunity to invest $100,000 in a project that will result revenue of $30,000 per year 7 years. The maintenance would be $800O0 per year and salvage value is $32,000 at end of year 7. What would be rate of return? O=-100000+32000(P/F.i.7)+(30000-8000)* (P/A,i,7) solve for i either using interpolation of excel,
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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Transcribed Image Text:Question 1
A firm has an opportunity to invest $100,000
in a project that will result revenue of
$30,000 per year 7 years. The maintenance
would be $8000 per year and salvage value is
$32,000 at end of year 7. What would be
rate of return?
O=-100000+32000*(P/F,i.7)+(30000-8000)*
(P/A,i,7)
solve for i either using interpolation of excel,
start with 10%, 25% and check.
O 17.46%
O 15.46%
19.46%
O 13.46%
Transcribed Image Text:D Question 2
Solve question 1 using equivalent uniform
annual worth. So:
0=-$100000*(A/P,i,7)+$22000+$32000*
(A/P,i,7)
find i.
O 16.04%
O 17.04%
O 19.04%
O 13.04%
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