Suppose you have the following two mutually exclusive projects that you can carry out on the corner of 39th Street and Walnut Street: Build a daycare center or a health spa. Suppose the day care center has the following cash flows: An immediate cash outlay of $5,000 followed by inflows of $2500 in each of the next 3 years and zero thereafter. Suppose the health spa has the following cash flows: An immediate outlay of $5000 followed by inflows of nothing in year one, $1000 in year 2 and $7100 in year 3 and zero thereafter. Is the IRR for the health spa lower or higher than the IRR for the day care project?
Suppose you have the following two mutually exclusive projects that you can carry out on the corner of 39th Street and Walnut Street: Build a daycare center or a health spa. Suppose the day care center has the following cash flows: An immediate cash outlay of $5,000 followed by inflows of $2500 in each of the next 3 years and zero thereafter. Suppose the health spa has the following cash flows: An immediate outlay of $5000 followed by inflows of nothing in year one, $1000 in year 2 and $7100 in year 3 and zero thereafter. Is the IRR for the health spa lower or higher than the IRR for the day care project?
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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Suppose you have the following two mutually exclusive projects that you can carry out on the corner of 39th Street and Walnut Street: Build a daycare center or a health spa.
Suppose the day care center has the following cash flows: An immediate cash outlay of $5,000 followed by inflows of $2500 in each of the next 3 years and zero thereafter.
Suppose the health spa has the following cash flows: An immediate outlay of $5000 followed by inflows of nothing in year one, $1000 in year 2 and $7100 in year 3 and zero thereafter.
Is the
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