A friend wants to open a roller disco (why not?). This will require an investment of $40,000 from you at the end of year 1, after which time you v receive annual dividends of $10,000 at the end of each of the 7 subsequent years. All of this is shown in the table below. The blue cells are currently blank Period Number 1. 4 6. 8. 1-Oct- 1-Oct- 1-Oct- 1-Oct- 1-Oct- 1-Oct- Start of period Number 1-Oct-15 16 1-Oct-22 17 18 19 20 21 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep 30-Sep- End of period Date 2016 17 18 19 20 21 22 23 Investment appraisal Cashflow (S40,000) $10.000 $10,000 $10,000 $10,000 $10,000 $10.000 $10,000 NPV of %24 3D cashflow Internal Rate of Return (IRR) Open Microsoft Excel and copy and paste the information from the table above into a spreadsheet (to paste as a table use the "Paste Special" feature and paste as Text. Format appropriately). Create formulas to calculate and show that: • The Net Present Value for the investment at a discount rate of 8% is $11,170.09 - The Internal Rate of Return for the investment is 16.33% Would you make this investment?
A friend wants to open a roller disco (why not?). This will require an investment of $40,000 from you at the end of year 1, after which time you v receive annual dividends of $10,000 at the end of each of the 7 subsequent years. All of this is shown in the table below. The blue cells are currently blank Period Number 1. 4 6. 8. 1-Oct- 1-Oct- 1-Oct- 1-Oct- 1-Oct- 1-Oct- Start of period Number 1-Oct-15 16 1-Oct-22 17 18 19 20 21 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep- 30-Sep 30-Sep- End of period Date 2016 17 18 19 20 21 22 23 Investment appraisal Cashflow (S40,000) $10.000 $10,000 $10,000 $10,000 $10,000 $10.000 $10,000 NPV of %24 3D cashflow Internal Rate of Return (IRR) Open Microsoft Excel and copy and paste the information from the table above into a spreadsheet (to paste as a table use the "Paste Special" feature and paste as Text. Format appropriately). Create formulas to calculate and show that: • The Net Present Value for the investment at a discount rate of 8% is $11,170.09 - The Internal Rate of Return for the investment is 16.33% Would you make this investment?
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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