3.A finance company has an opportunity to purchase three promissory notes from a broker for a totalof $140,000 cash. The first note would pay $20,000 in one year, the second would pay S$70,000 in twoyears and the third $80,000 in three years. The finance company has set for itself a minimum acceptablerate of return of 10% effective.a. Evaluate the net present value of the investment at the company's MARR.b. State your conclusion about the acceptability of the profitability of this deal.

Net present value(NPV) is the capital budgeting method used for finding the profitability of the…

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Evaluate the net present value of the investment at the company's MARR. State w

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

3.
A finance company has an opportunity to purchase three promissory notes from a broker for a total
of $140,000 cash. The first note would pay $20,000 in one year, the second would pay S$70,000 in two
years and the third $80,000 in three years. The finance company has set for itself a minimum acceptable
rate of return of 10% effective.
a. Evaluate the net present value of the investment at the company's MARR.
b. State your conclusion about the acceptability of the profitability of this deal.

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