QUESTION 5 (a) (b) A printing machine which costs €20,000 today will increase in price by 8% per year as a result of inflation. (i) (ii) What would this machine cost in 3 years' time? If the firm wishes to purchase this machine by making 3 equal instalments [the first one now, the second one in one year's time and the third in two years' time], in a savings plan paying 5% per annum, how much should each instalment be? Show all workings A small business has a choice of investing €20,000 in one of two projects. The revenue received in each over the next four years is given below. (c) (i) End of year Project A Project B 1 6000 10000 2 3000 6000 3 10000 9000 4 8000 1000 If the discount rate is 12%, which of the two projects would you advise the company to invest in? (ii) Calculate the internal rate of return for your choice in part (i) above, use a discount rate of 15%. How much would €2,000 grow to in 3 years if it could earn 10% nominal interest which is compounded every six months.
QUESTION 5 (a) (b) A printing machine which costs €20,000 today will increase in price by 8% per year as a result of inflation. (i) (ii) What would this machine cost in 3 years' time? If the firm wishes to purchase this machine by making 3 equal instalments [the first one now, the second one in one year's time and the third in two years' time], in a savings plan paying 5% per annum, how much should each instalment be? Show all workings A small business has a choice of investing €20,000 in one of two projects. The revenue received in each over the next four years is given below. (c) (i) End of year Project A Project B 1 6000 10000 2 3000 6000 3 10000 9000 4 8000 1000 If the discount rate is 12%, which of the two projects would you advise the company to invest in? (ii) Calculate the internal rate of return for your choice in part (i) above, use a discount rate of 15%. How much would €2,000 grow to in 3 years if it could earn 10% nominal interest which is compounded every six months.
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
Related questions
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![QUESTION 5
(a)
(b)
A printing machine which costs €20,000 today will increase in price by 8% per year as a result
of inflation.
(i)
(ii)
What would this machine cost in 3 years' time?
If the firm wishes to purchase this machine by making 3 equal instalments [the first
one now, the second one in one year's time and the third in two years' time], in a
savings plan paying 5% per annum, how much should each instalment be? Show all
workings
A small business has a choice of investing €20,000 in one of two projects. The revenue
received in each over the next four years is given below.
(c)
(i)
End of year
Project A
Project B
1
6000
10000
2
3000
6000
3
10000
9000
4
8000
1000
If the discount rate is 12%, which of the two projects would you advise the company
to invest in?
(ii)
Calculate the internal rate of return for your choice in part (i) above, use a discount
rate of 15%.
How much would €2,000 grow to in 3 years if it could earn 10% nominal interest which is
compounded every six months.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf1c8f39-55b1-4e6f-9374-eeb150148dfa%2F07b003d4-bd31-4346-8760-739d73c63eb2%2Fcbrui49_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION 5
(a)
(b)
A printing machine which costs €20,000 today will increase in price by 8% per year as a result
of inflation.
(i)
(ii)
What would this machine cost in 3 years' time?
If the firm wishes to purchase this machine by making 3 equal instalments [the first
one now, the second one in one year's time and the third in two years' time], in a
savings plan paying 5% per annum, how much should each instalment be? Show all
workings
A small business has a choice of investing €20,000 in one of two projects. The revenue
received in each over the next four years is given below.
(c)
(i)
End of year
Project A
Project B
1
6000
10000
2
3000
6000
3
10000
9000
4
8000
1000
If the discount rate is 12%, which of the two projects would you advise the company
to invest in?
(ii)
Calculate the internal rate of return for your choice in part (i) above, use a discount
rate of 15%.
How much would €2,000 grow to in 3 years if it could earn 10% nominal interest which is
compounded every six months.
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