14. The company has invested$320,000 in a business that isestimated to provide $75,000 inthe first year, with annualincreases of $5,000 for five years.income of $75,000 the first year,with annual increments of $5,000for five years.At the end of this time, the assetsremaining from the investmentcould be sold for $50,000.50,000. If the investor's ARRR is15% per year. Determine the NPVand IRRa) $127,895.10 y 41.30%b) $137,895.10 y 30.41%c) $127,895.10 y 30.41%d) N.A

Net present value is the difference between the present value of cash flow and initial investment…

Answered: The company has invested $320,000 in a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 34P

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Suppose an industrial building can be purchased for $2,500,000 and is expected to yield cash flows of $180,000 in each of the next five years. (Note: assume payments are made at end of year.) If the building can be sold at the end of the fifth year for $2,800,000, calculate the IRR for this investment over the five-year holding period. A) 0.09%. B) 4.57%. C) 9.20%. Page 4 of 6 D) 10.37%
EmKay Inc. has $1,000,000 available to invest. It has narrowed its choices to two investments, and each is expected to generate income over a 10-year period. Investment A is expected to generate a net income of $100,000 at the end of year one with an annual increase of $20,000 each year in net annual income over the subsequent 9 years. Investment B is expected to generate a net income of $80,000 at the end of year one and the net annual income over each of the next 9 years is expected to be 20% larger than the previous year's net annual income. The company's TVOM is 8% per year compounded annually. a) b) c) any? Explain. Compute the present worth of the net income from Investment A over the 10-year period. Compute the present worth of the net income from Investment B over the 10-year period. Based on the above present worth calculations, which investment should EmKay, Inc. choose, if
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The company has invested $320,000 in a business that is estimated to provide $75,000 in