Term of investment (in years) Amount invested Annual cash from dividend at end of each year One Ltd. 15 $250 24.1 Two Ltd. 10 $ 110 12.8 Three Ltd. 6 $ 180 40 Four Ltd. 5 $ 450 130
Term of investment (in years) Amount invested Annual cash from dividend at end of each year One Ltd. 15 $250 24.1 Two Ltd. 10 $ 110 12.8 Three Ltd. 6 $ 180 40 Four Ltd. 5 $ 450 130
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.2.1MBA
Related questions
Question
Your company has an opportunity to invest in four companies. You are trying to
determine which of these investments make sense. Your company has a 9% cost of
capital. It will invest in these companies and receive an annual cash dividend each
year starting one year after the investment. At the end of the term of investment, the
investment will be scrapped with no salvage value. (a) Determine the internal rate of
return for each investment. Round off to the nearest integer discount rate, with
detailed calculation process. (b)Which investments would you recommend your
company make?
Transcribed Image Text:Term of investment (in
years)
Amount invested
Annual cash from dividend
at end of each year
One
Ltd.
15
$250
24.1
Two
Ltd.
10
$ 110
12.8
Three
Ltd.
6
$ 180
40
Four
Ltd.
5
$ 450
130
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