Two investments have the following pattern of expected returns:Investment AYear 1 2 3 4 4 (sale)BTCF $5,000 $10,000 $12,000 $15,000 $120,000Investment BYear 1 2 3 4 4 (sale)BTCF $2,000 $4,000 $1,000 $5,000 $180,000Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000.a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCFo and BTCFs what proportions of the BTIRR would be represented by each?c. What do these proportions mean?
Two investments have the following pattern of expected returns:Investment AYear 1 2 3 4 4 (sale)BTCF $5,000 $10,000 $12,000 $15,000 $120,000Investment BYear 1 2 3 4 4 (sale)BTCF $2,000 $4,000 $1,000 $5,000 $180,000Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000.a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCFo and BTCFs what proportions of the BTIRR would be represented by each?c. What do these proportions mean?
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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Two investments have the following pattern of expected returns:
Investment A
Year 1 2 3 4 4 (sale)
BTCF $5,000 $10,000 $12,000 $15,000 $120,000
Investment B
Year 1 2 3 4 4 (sale)
BTCF $2,000 $4,000 $1,000 $5,000 $180,000
Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000.
a. What is the BTIRR on each investment?
b. If the BTIRR were partitioned based on BTCFo and BTCFs what proportions of the BTIRR would be represented by each?
c. What do these proportions mean?
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