QUESTION 2 An investor invests $40,000 today, in exchange for continuous cash flows of $15,000 per year for 3 years. a) Calculate the NPV of this investment at an annual effective hurdle rate of 5%. b) Calculate the annual effective dollar-weighted rate of return for this investment (either exactly or using the approximation) c) Calculate the discounted payback period for this investment at an annual effective hurdle rate of 5%.
QUESTION 2 An investor invests $40,000 today, in exchange for continuous cash flows of $15,000 per year for 3 years. a) Calculate the NPV of this investment at an annual effective hurdle rate of 5%. b) Calculate the annual effective dollar-weighted rate of return for this investment (either exactly or using the approximation) c) Calculate the discounted payback period for this investment at an annual effective hurdle rate of 5%.
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
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Transcribed Image Text:QUESTION 2
An investor invests $40,000 today, in exchange for continuous cash flows of $15,000
per year for 3 years.
a) Calculate the NPV of this investment at an annual effective hurdle rate of 5%.
b) Calculate the annual effective dollar-weighted rate of return for this investment (either
exactly or using the approximation)
c) Calculate the discounted payback period for this investment at an annual effective hurdle
rate of 5%.
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