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Solve the above two cases (the cases are independent). What is the accounting rate of return? (Ignoring taxes)

Solve the above two cases (the cases are independent). What is the accounting rate of return? (Ignoring taxes)

Essentials Of Investments
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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1. If you invest $4,000 today at 10% interest, what is the value of the investment at the end of 5 years? 2. If you invest $1,000 at the end of each of the next 5 years and the investment earns 10% interest, what is the value of the investment at the end of 5 years? FV factor at 10% at year 5 is 1.6105 (Table A-1 Future Value Interest Factors for One Dollar Compounded) FV annuity factor at 10 for 5 years is 6.1051 (Table A-2 Future Value Interest Factors for a One-Dollar Annuity) Requirement: Solve the above two cases (the cases are independent). What is the accounting rate of return? (Ignoring taxes) Hints and Reference: Lecture and reading material of Capital Budgeting Part-2 and related MS excel file.
Transcribed Image Text:1. If you invest $4,000 today at 10% interest, what is the value of the investment at the end of 5 years? 2. If you invest $1,000 at the end of each of the next 5 years and the investment earns 10% interest, what is the value of the investment at the end of 5 years? FV factor at 10% at year 5 is 1.6105 (Table A-1 Future Value Interest Factors for One Dollar Compounded) FV annuity factor at 10 for 5 years is 6.1051 (Table A-2 Future Value Interest Factors for a One-Dollar Annuity) Requirement: Solve the above two cases (the cases are independent). What is the accounting rate of return? (Ignoring taxes) Hints and Reference: Lecture and reading material of Capital Budgeting Part-2 and related MS excel file.
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