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The value of C0 is___. b If the firm financed the investment in (a) with debt costing 0.25, the debt amortization table (using the funds generated by the investment to repay the loan) would be

The value of C0 is___. b If the firm financed the investment in (a) with debt costing 0.25, the debt amortization table (using the funds generated by the investment to repay the loan) would be

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
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CH 3. #8 a An investment with an internal rate of return of 0.25 has the following cash flows:

Time Cash flow
0 C0
1 +$8,000
2 +10,000

The value of C0 is___.

b If the firm financed the investment in (a) with debt costing 0.25, the debt amortization table (using the funds generated by the investment to repay the loan) would be

 

A Week 3 Assignment 1 VitalSource Bookshelf: The Cap x о Mail - outlook 8E6AAB8B8EB6 х G It has been said that few stockl X b My Questions | bartleby + A online.vitalsource.com/#/books/9781135656232/cfi/6/22!/4/516/22/16/4/2@0:0 8. Compute the net present value (use a cost of money of 0.15) and the internal rate of return for each of the following investments: A <3. Capital Budgeting:.. Investment Perlod Go to 3. Capital Budgeting: The 1 2 Traditional Solutions A $(1,000) $1,322 B (1,000) $615 615 What firms do (1,000) 1,150 Cash flows 9. Recompute the net present values using (a) a cost of money of 0.20 and (b) a cost of money of 0.05 for each of the investments of problem 8. 10. Prepare a schedule showing that, with a rate of growth of 0.15 per year $1,000 will grow to $1,322 in two years. 11. Determine the internal rate of return of the following investment: Working capital Period Cash flow $(9,120) 1,000 5,000 10,000 Excluding interest payment 2 Conclusions Pop quiz 12. How much could you pay in excess of the indicated cost for the investment in problem 11 if the cost of money were 0.10? 13. Assume that you can only invest in one of the three investments of problem 8. Review problems a. Using the internal rates of return of the three investments, which is preferred? b. Using the net present value method and a cost of money of 0.05, which is preferred? Problems 14. A company uses a 10 percent discount rate. Assume equal annual cash proceeds. What should be the maximum acceptable payback period for equipment whose life is 5 years? What are the maximum acceptable paybacks for lives of 10, 20, and 40 years and infinite life? 15. Assume that the discount rate is 5 percent and answer problem 14. 16. Assume the discount rate is 0.06. A new machine that costs $7,000 has equal annual cash proceeds over its entire life and a payback period of 7.0 years. What is the minimum number of full years of life it must have to be acceptable? 17. Compute the internal rate of return of the following two mutually exclusive investments: Answers to pop quiz Solutions to review problems We've updated our read aloud feature! Give it a try here. Bibliography Investment Perlod Aa 4) 10:09 PM P Type here to search a O G 4) 10/6/2020 !
Transcribed Image Text:A Week 3 Assignment 1 VitalSource Bookshelf: The Cap x о Mail - outlook 8E6AAB8B8EB6 х G It has been said that few stockl X b My Questions | bartleby + A online.vitalsource.com/#/books/9781135656232/cfi/6/22!/4/516/22/16/4/2@0:0 8. Compute the net present value (use a cost of money of 0.15) and the internal rate of return for each of the following investments: A <3. Capital Budgeting:.. Investment Perlod Go to 3. Capital Budgeting: The 1 2 Traditional Solutions A $(1,000) $1,322 B (1,000) $615 615 What firms do (1,000) 1,150 Cash flows 9. Recompute the net present values using (a) a cost of money of 0.20 and (b) a cost of money of 0.05 for each of the investments of problem 8. 10. Prepare a schedule showing that, with a rate of growth of 0.15 per year $1,000 will grow to $1,322 in two years. 11. Determine the internal rate of return of the following investment: Working capital Period Cash flow $(9,120) 1,000 5,000 10,000 Excluding interest payment 2 Conclusions Pop quiz 12. How much could you pay in excess of the indicated cost for the investment in problem 11 if the cost of money were 0.10? 13. Assume that you can only invest in one of the three investments of problem 8. Review problems a. Using the internal rates of return of the three investments, which is preferred? b. Using the net present value method and a cost of money of 0.05, which is preferred? Problems 14. A company uses a 10 percent discount rate. Assume equal annual cash proceeds. What should be the maximum acceptable payback period for equipment whose life is 5 years? What are the maximum acceptable paybacks for lives of 10, 20, and 40 years and infinite life? 15. Assume that the discount rate is 5 percent and answer problem 14. 16. Assume the discount rate is 0.06. A new machine that costs $7,000 has equal annual cash proceeds over its entire life and a payback period of 7.0 years. What is the minimum number of full years of life it must have to be acceptable? 17. Compute the internal rate of return of the following two mutually exclusive investments: Answers to pop quiz Solutions to review problems We've updated our read aloud feature! Give it a try here. Bibliography Investment Perlod Aa 4) 10:09 PM P Type here to search a O G 4) 10/6/2020 !
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