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
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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.
Transcribed Image Text: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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