Kate Berry will not invest unless she can earn at least a(n) 10% return. She is evaluating an investment opportunity that requires an initial outlay of $2,200 and promises to return $4,400 in 8 years. a. Use present value techniques to estimate the IRR on this investment. b. On the basis of your finding in part a, should Kate make the proposed investment? Explain. a. The yield on this investment is %. (Enter as a percentage and round to two decimal places.) b. On the basis of your finding in part a, should Kate make the proposed investment? (Select the best answer below.) OA. No, because a minimum required return of 10% does not compensate for an investment that lasts longer than one year. OB. Yes, because a minimum required return of 10% is an arbitrary choice for an investment of this risk level. OC. Yes, because this investment yields more than the minimum required return of 10%. OD. No, because this investment yields less than the minimum required return of 10%.

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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Kate Berry will not invest unless she can earn at least a(n) 10% return. She is evaluating an investment opportunity that requires an initial outlay of $2,200 and promises to return $4,400 in 8 years.
a. Use present value techniques to estimate the IRR on this investment.
b. On the basis of your finding in part a, should Kate make the proposed investment? Explain.
a. The yield on this investment is%. (Enter as a percentage and round to two decimal places.)
b. On the basis of your finding in part a, should Kate make the proposed investment? (Select the best answer below.)
A. No, because a minimum required return of 10% does not compensate for an investment that lasts longer than one year.
O B. Yes, because a minimum required return of 10% is an arbitrary choice for an investment of this risk level.
C. Yes, because this investment yields more than the minimum required return of 10%.
D. No, because this investment yields less than the minimum required return of 10%.
Transcribed Image Text:Question list Question 4 Question 5 O Question 6 Question 7 Question 8 O Question 9 K Kate Berry will not invest unless she can earn at least a(n) 10% return. She is evaluating an investment opportunity that requires an initial outlay of $2,200 and promises to return $4,400 in 8 years. a. Use present value techniques to estimate the IRR on this investment. b. On the basis of your finding in part a, should Kate make the proposed investment? Explain. a. The yield on this investment is%. (Enter as a percentage and round to two decimal places.) b. On the basis of your finding in part a, should Kate make the proposed investment? (Select the best answer below.) A. No, because a minimum required return of 10% does not compensate for an investment that lasts longer than one year. O B. Yes, because a minimum required return of 10% is an arbitrary choice for an investment of this risk level. C. Yes, because this investment yields more than the minimum required return of 10%. D. No, because this investment yields less than the minimum required return of 10%.
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