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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Question
only need ERR please.
Transcribed Image Text:A company has the opportunity to take over a redevelipment project in an industrial area of a city No immediate investment is
equired, but it must raze the existing buldings over a four year period and, at the end of the fourth year, invest $2390.000 for new
construction It will collect all revenues and pay all costs for a period of 10 years at which lime the entire project, and properties
thereon, will revert to the city The net cash tows are estimated to be as shown on the right
Tabulate the PW versus the interest rate and detemine whether mutiple RRs est If so, use the ERR method when e= 10% per
year to detenmine a rate of suturn
Year End
Net Cash Flow
14.000
330.000
90 000
-2,190.000
140 000
190.000
Cick the kcon to view the interest and anmulty table tor dncrete compounding when the MARR is to% per year.
240,000
20.000
340 000
10
390,000
There islare wo
RR valus) tor the given net cash-ow sequence
The fest IRR value i 30S (Round to one decimal place)
The second IRR vakun in 310N (Round to one decimal place)
The ERR is (Round to one decimal place
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