Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.60%. This investment would require an initial outlay of cash of $105,500, and at the end of the 5-year life of this investment INA Corporation is expected to have to pay a wind-down cost of $5,273. For the first 4 years of this investment, net annual cash inflows are expected to be $36,500 and for the last year of the investment, the net annual cash inflow is expected to be $91,250.
Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.60%. This investment would require an initial outlay of cash of $105,500, and at the end of the 5-year life of this investment INA Corporation is expected to have to pay a wind-down cost of $5,273. For the first 4 years of this investment, net annual cash inflows are expected to be $36,500 and for the last year of the investment, the net annual cash inflow is expected to be $91,250.
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:6. How much is the
present value of the
purchase of equipment?
7. How much is the
present value of the
wind-down cost?
8. How much is the
present value of the
annual cash inflows for
the first 4 years?
Y
9. How much is the
present value of the
annual cash inflow for
F
the final year of this
investment?
10. How much is the
Net Present Value?
11. What is the Internal
Rate of Return? (round
to the nearest
Thundredths place/input
Transcribed Image Text:-
Investment Option "South"
This potential investment is less risky and shorter term, so it has a minimum
rate of return of 8.60%. This investment would require an initial outlay of cash
of $105,500, and at the end of the 5-year life of this investment INA
Corporation is expected to have to pay a wind-down cost of $5,273. For the
first 4 years of this investment, net annual cash inflows are expected to be
$36,500 and for the last year of the investment, the net annual cash inflow is
expected to be $91,250.
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