Two investments have the following pattern of expected returns:Investnent AYear 1$5, 100Year 2$10,100Year 3Year 4Year 4 (Sale)$121,000STCF$12,100$15,100Investment BYear 1$2,100Year 2$4,100Year 3$1,100Year 4Year 4 (Sale)$181,000BTCF$5,100Investment A requires an outlay of $111,000 and Investment B requires an outlay of $121,000.Required:a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCF, and BTCF, what proportions of the BTIRR would be represented by each?c. Which investment would be preferable? picte LIIS question by entering your answers in theRequired ARequired BRequired CWhat is the BTIRR on each investment? (Round your answers toInvestment AInvestment BBTIRR%%Required ARequired ARequired BRequired CIf the BTIRR were partitioned based on BTCF, and BTCF3: what proportions of the BTIRR would be represented by each? (Donot round intermediate calculations. Round your answers to the nearest whole number.)Investment AInvestment BBTIRR based on BTCF.BTIRR based on BTCFS< Required ARequired C >Required ARequired BRequired CWhich investment would be preferable?Which investment would be preferable?< Required BRequired C

BTIRR is the before tax internal rate of return of the cash flows. It is the rate at which the net…

Two investments have the following pattern of expected retuns: Year 1 $5,100 Year 2 $10,100 Investment A Year 3 $12,100 Year 4 $15,100 Year 4 (Sale) $121,000 BTCF Year 1 $2,100 Investment B Year 3 $1,100 Year 2 Year 4 $5,100 Year 4 (Sale) $161,000 BTCF $4,100 Investment A requires an outlay of $11.000 and Investment B requires an outlay of $121.000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCF, and BTCF what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?

Two investments have the following pattern of expected retuns: Year 1 $5,100 Year 2 $10,100 Investment A Year 3 $12,100 Year 4 $15,100 Year 4 (Sale) $121,000 BTCF Year 1 $2,100 Investment B Year 3 $1,100 Year 2 Year 4 $5,100 Year 4 (Sale) $161,000 BTCF $4,100 Investment A requires an outlay of $11.000 and Investment B requires an outlay of $121.000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCF, and BTCF what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Two investments have the following pattern of expected returns:
Investnent A
Year 1
$5, 100
Year 2
$10,100
Year 3
Year 4
Year 4 (Sale)
$121,000
STCF
$12,100
$15,100
Investment B
Year 1
$2,100
Year 2
$4,100
Year 3
$1,100
Year 4
Year 4 (Sale)
$181,000
BTCF
$5,100
Investment A requires an outlay of $111,000 and Investment B requires an outlay of $121,000.
Required:
a. What is the BTIRR on each investment?
b. If the BTIRR were partitioned based on BTCF, and BTCF, what proportions of the BTIRR would be represented by each?
c. Which investment would be preferable?

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The following information will be used to answer questions 8, 9, and 10. Your company can invest in 1 of the following projects: Cash Flows Year Project A Project B 0 -70.000 -65.000 1 30.000 8.000 2 10.000 8.000 3 10.000 8,000 4 18.000 9.000 O 5.000 30.000 6 4.000 40.000 The interest rate is 8%. 8a. What is the payback period for each project? 8b. If you base your decision on which project has the shortest payback, which will you choose?
Use the following table: Present Value of an Annuity of 1 Period 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $111,915 and is expected to generate cash inflows of $45,000 each year for three years. The approximate internal rate of return on this project is a)8% B)9% C)10% D)less than the required 8%.
Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF 0 -$100 1 $15 2 $15 3 $15 4 $15 5 $15 6 $15 Part a Determine the ERR for this project: % Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.
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j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year 1 $100, Year 2 $200, Year 3 $400 Year Payment 1 100 2 200 3 400 Rate 8% To find the PV, use the NPV function: Pv= $581.59 Year Payment x (1+ I)^(N- t) = FV 1 100 2 200 3 400
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H
Annual cash inflows that will arise from two competing investment projects are given below: Year Investment A Investment B 1 $7,000 $ 10,000 2 8,000 3 9,000 4 10,000 $ 34,000 9,000 8,000 7,000 $ 34,000 The discount rate is 7%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment.
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