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$300 $300 $300 $300 $300 i. 2 3 4 End of Year $1,000 $300 $300 $300 $300 $300 5 6 7 8 End of Year $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 5 6 7 8. End of Year $5,000

$300 $300 $300 $300 $300 i. 2 3 4 End of Year $1,000 $300 $300 $300 $300 $300 5 6 7 8 End of Year $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 5 6 7 8. End of Year $5,000

Essentials Of Investments
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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Solve, a. Calculate the IRR for each of the three cash-flow diagrams that follow. Use EOY zero for (i) and EOY four for (ii) and (iii) as the reference points in time. What can you conclude about “reference year shift” and “proportionality” issues of the IRR method?  b. Calculate the PW at MARR=10 % per year at EOY zero for (i) and (ii) and EOY four for (ii) and (iii). How do the IRR and PW methods compare?

$300 $300 $300 $300 $300 i. 2 3 4 End of Year $1,000 $300 $300 $300 $300 $300 5 6 7 8 End of Year $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 5 6 7 8. End of Year $5,000
Transcribed Image Text:$300 $300 $300 $300 $300 i. 2 3 4 End of Year $1,000 $300 $300 $300 $300 $300 5 6 7 8 End of Year $1,000 $1,500 $1,500 $1,500 $1,500 $1,500 5 6 7 8. End of Year $5,000
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