Capital Budgeting (NPV) Year Cash Flows -5,969 1 1,516 2 1,656 3 1,738 4 2.094 Currently, the investor's required rate of return 4.7% Please compute the projects NPV (hint: it is positive). What if interest rates in the broad economy went up. and also the firm became riskier? Investors would require a higher rate of return. 1. Suppose the required rate increases 2%. How much would the NPV drop? A Between 200 and 270 B Between 270 and 280 C Between 280 and 290 D Between 290 and 300
Capital Budgeting (NPV) Year Cash Flows -5,969 1 1,516 2 1,656 3 1,738 4 2.094 Currently, the investor's required rate of return 4.7% Please compute the projects NPV (hint: it is positive). What if interest rates in the broad economy went up. and also the firm became riskier? Investors would require a higher rate of return. 1. Suppose the required rate increases 2%. How much would the NPV drop? A Between 200 and 270 B Between 270 and 280 C Between 280 and 290 D Between 290 and 300
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:Capital Budgeting (NPV)
Year
Cash Flows
-5,969
1
1,516
2
1,656
3
1,738
4
2.094
Currently, the investor's required rate of
return
4.7%
Please compute the projects NPV (hint: it is positive).
What if interest rates in the broad economy went up.
and also the firm became riskier? Investors would
require a higher rate of return.
1. Suppose the required rate increases 2%.
How much would the NPV drop?
A Between 200 and 270
B Between 270 and 280
C Between 280 and 290
D Between 290 and 300
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