None Applying the ERR and IRRmethod:A company which is purchased now for 23000 will lose1200 each year the first four years. An additional 8000invested in the company in the end of the fourth year willresult in a profit of 5500 each year from the fifth yearthrough the next fifteen year; when the company can be soldfor 33000. if MARR1-Calculate the ERR2-Calculate the IRR=12%

Based on the provided data, we must compute the external rate of return (ERR) and internal rate of…

Answered: Applying the ERR and IRR method: A…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 6E

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Similar questions

Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low?
A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firms cost of capital is 12 percent. Compute the IRR and the NPV. Should the firm accept or reject the project?
What is a dividend?
What is deflation?
Metropolitan Hospital has estimated its average monthly bed needs as N=1,000+9X where X=timeperiod(months);January2002=0 N=monthlybedneeds Assume that no new hospital additions are expected in the area in the foreseeable future. The following monthly seasonal adjustment factors have been estimated, using data from the past five years: Forecast Metropolitans bed demand for January, April, July, November, and December 2007. If the following actual and forecast values for June bed demands have been recorded, what seasonal adjustment factor would you recommend be used in making future June forecasts?
A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?
What is a capital gain?
Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N=400+4X where N=monthlydemandforbagsofpottingsoil X=timeperiodsinmonths(March2006=0) Assume this trend factor is expected to remain stable in the foreseeable future. The following table contains the monthly seasonal adjustment factors, which have been estimated using actual sales data from the past five years: Forecast Bell Greenhouses demand for potting soil in March, June, August, and December 2007. If the following table shows the forecasted and actual potting soil sales by Bell Greenhouses for April in five different years, determine the seasonal adjustment factor to be used in making an April 2008 forecast.

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