Alternative G has a first cost of $250,000 and annual costs of $73,000. Alternative H has a first cost of$350,000 and annual costs of $48,000. If the alternatives are considered to last indefinitely, the rate of returnon the increment of investment is closest to:Note: n is infinity, use/* A^/AP25%/year20%/year21%/year12%/yeara.b.C.d.

The present value is the value of the sum received at time 0. It is the current value of the sum…

Answered: Alternative G has a first cost of…

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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Similar questions

An investment under consideration has a payback of seven years and a cost of $884,000. Assume the cash flows are conventional. If the required return is 11 percent, what is the worst-case NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. Calculate the following Periodic Total Returns on a 5-year investment. To your calculations, assume that you have selling costs of 5% Year NCF (€) Market Value (€) Total Return 95,000 95,000 1. 10,000 98,000 5,000 100,000 8,000 101,000 4 12,000 103,000 135,000 117,000 b. If the quarterly Income Return is 2.2% and the Quarterly Capital Return is 0.4%, calculate the Annual Total Return of the investment 2. 3.
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Justin Lieberman must earn a minimum rate of return of 16.79% as compensation for the risk of the following investment a. Use present value techniques to estimate the IRR on this investment. b. On the basis of your finding in part a, should Justin make the proposed investment? a. The yield on this investment is %. (Round to two decimal places.) Data table Initial Investment End of Year 1 2345 $15,119 Income $3,957 $4,879 $5,900 $3,601 $2,000 - X C
For your ongoing business, the required investments are $420,000 for X1, $550,000 for X2, $720,000 for X3, and $800,000 for X4. X0 denotes the do-nothing alternative. Moreover, you had information about the internal rates of return for the incremental projects: IRR for X1-XO is 18%, IRR for X2-XO is 20%, IRR for X3-XO is 25%, IRR for X4-XO is 30%, IRR for X2-X1 is 10%, IRR for X3-X1 is 21%, IRR for X4-X1 is 19%, IRR for X3- X2 is 18%, IRR for X4-X3 is 14%, IRR for X4-X2 is 23%. Using the information above, if the MARR is 15%, what system should be selected? а) ХО O b) X2 с) XЗ d) None of the answers are correct e) X1 O f) X4
You’re trying to choose between two different investments, both of which have upfront costs of K75,000. Investment G returns K135,000 in six years. Investment H returns K195,000 in 10 years. Which of these investments has the higher return?
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The present worth of income from an investment that follows an arithmetic gradient was projected to be $9500. If the income in year 1 is expected to be $1200, how much would the gradient have to be in each year, through year 7 if the interest rate is 10% per year? Select one: O a. 765 O b. 491 O c. 153 O d. 287 O e. 513
Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize E(PW). Using an MARR of 18% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. D6 X Y Z High (X) Low (X) High (Y) Low (Y) High High (Z) Low (Z) Low High Low High Investment, Cash Flow, (Year Cash Flow, $1000 Year 3 3) (Year 4) 3 4 $-260,000 $50 $40 $30 $30 $190 $-30 Low $-52,000 $-250,000 The present worth of X is $ The present worth of Y is $ The present worth of Z is $ Select decision branch Y Cash Flow, $1000 (Year 5) 5 $50 $30 $40 $30 $170 $-30 Cash Flow, $1000 (Year 6) 6 $50 $20 $50 $30 $150 $-30 Outcome Probability 0.72 0.28 0.45 0.55 0.7 0.3
An investment offers the following: a series of $1000 annual payments, starting one year from now, for a total of 12 payments. If your opportunity cost (as an EAR) is 5%, what is the investment worth to you today? Group of answer choices $11,079.20 $9,214.56 $10,103.26 $8,863.25 $10,241.19 Give typing answer with explanation and conclusion
Assume you invest $5,100 today in an investment that promises to return $6,928 in exactly 10 years. a. Use the present-value technique to estimate the IRR on this investment. b. If a minimum annual return of 9% is required, would you recommend this investment? #69 Part 1 a. The IRR of the investment is enter your response here%. (Round to the nearest whole percent.) Part 2 b. If a minimum return of 9% is required, would you recommend this investment? (Select the best choice below.) A. No, because this investment yields less than the minimum required return of 9%. B. Yes, because a minimum required return of 9% does not compensate for an investment that lasts longer than one year. C. No, because a minimum required return of 9% is an arbitrary choice for an investment of this risk level. D. Yes, because this investment yields more than the minimum required return of 9%

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