Two investment opportunities are available, with expected income flows as Table Q4: Table Q4: Investment Opportunities Year Investment A Investment B RM 7,000 RM 6,000 2 RM 8,000 RM 6,000 3 RM 9,000 RM 9,000 4 RM 10,000 RM 9,000 5 RM 11,000 RM 12,000 Investment A may be purchased for RM125,000 and Investment B for RM120,000. In 5 years' time, the investment are expected to sell for RM175,000 and RM180,000
Two investment opportunities are available, with expected income flows as Table Q4: Table Q4: Investment Opportunities Year Investment A Investment B RM 7,000 RM 6,000 2 RM 8,000 RM 6,000 3 RM 9,000 RM 9,000 4 RM 10,000 RM 9,000 5 RM 11,000 RM 12,000 Investment A may be purchased for RM125,000 and Investment B for RM120,000. In 5 years' time, the investment are expected to sell for RM175,000 and RM180,000
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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Transcribed Image Text:Two investment opportunities are available, with expected income flows as Table Q4:
Table Q4: Investment Opportunities
Year
Investment A
Investment B
RM 7,000
RM 6,000
2
RM 8,000
RM 6,000
3
RM 9,000
RM 9,000
4
RM 10,000
RM 9,000
5
RM 11,000
RM 12,000
Investment A may be purchased for RM125,000 and Investment B for RM120,000. In 5
years' time, the investment are expected to sell for RM175,000 and RM180,000
respectively.
The investor requires a 12 per cent return on capital.
Calculate the Net Present Value (NPV) of Investment A & Investment B at a discount rate
of 12 per cent.
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