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
InterCell Company wants to participate in the upcoming World's Fair in Korea. To participate, the firm needs to spend $1.5 million in year 0 to develop a showcase. The showcase will produce a cash flow of $3.75 million at the end of year 1. Then at the end of year 2, $2.31 million must be expended to restore the land on which the showcase was presented to its original condition. Therefore, the project's expected net cash flows are as follows (in thousands of dollars):
(a) Plot the present worth of this investment as a function of i.
(b) Compute the i*s for this investment. Is this a pure investment?
( c) Would you accept this investment at MARR= 14 % ?
Transcribed Image Text:n Net Cash Flow
-$1,500
1
$3,750
2
-$2,310
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