Which of the following investment options has the lowest IRR? (Hint: calculation is not necessary to answer this question)Cash Flow Investment Investment Investment Investment Cost of Capital12345%(30,000)YearDescriptionYear 0 (today) Buy StockYear 1Year 2Year 3Year 4Year 5DividendsDividendsDividendsDividendsSell StockMultiple ChoiceInvestment 3Investment 1Investment 4Investment 2(30,000) (30,000)6,00030,0002,0002,00032,000(30,000)2,0002,00032,0002,0002,00032,000

IRR is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Which of the following investment options has the lowest IRR? (Hint: calculation is not necessary to answer this question) Cash Flow Investment Investment Investment Investment Cost of Capital 1 2 3 4 5% (30,000) Year Description Year 0 (today) Buy Stock Year 1 Dividends Year 2 Dividends Dividends Dividends Sell Stock Year 3 Year 4 Year 5 Multiple Choice Investment 31 Investment 1 Investment 4 Investment 2 (30,000) (30,000) 6,000 30,000 2,000 2,000 32,000 (30,000) 2,000 2,000 32,000 2,000 2,000 32,000

Which of the following investment options has the lowest IRR? (Hint: calculation is not necessary to answer this question) Cash Flow Investment Investment Investment Investment Cost of Capital 1 2 3 4 5% (30,000) Year Description Year 0 (today) Buy Stock Year 1 Dividends Year 2 Dividends Dividends Dividends Sell Stock Year 3 Year 4 Year 5 Multiple Choice Investment 31 Investment 1 Investment 4 Investment 2 (30,000) (30,000) 6,000 30,000 2,000 2,000 32,000 (30,000) 2,000 2,000 32,000 2,000 2,000 32,000

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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The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.
Please answer all 4 parts with explanations thx
Which of the following is correct? O A. Common stock valuation usually treats the common stock as a perpetuity. OB. The appropriate measure for risk according to the capital asset pricing model is beta. OC. The present value of a $100 perpetuity discounted at 5% is $2,000. OD. The incremental cost is the cost of making a choice defined in terms of the next best alternative that is foregone. OE. Both B and C.
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Please give answer a & b And Don't give answer in image format
. Year End Cash Flow Alternative A Alternative B 0 -1,000 600 1 600 500 2 600 -2,000 3 600 400 4 600 200 5 -2,100 -1,000 6 700 1,386 a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward b) what are the rate of return of the two alternatives c) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?
b. If the BTIRR were partitioned based on BTCFo and BTCFs' what proportions of the BTIRR would be represented by each?
Figure 2 (a) Financial engineering deals with the design of new assets. Draw the payoff (at t=1) of the following butterfly spread: payoff of portfolio Purchase 1 call with exercise price a Sell 2 calls with exercise price (atb)/2 Purchase 1 call with exercise price b as a function of the underlying stock price S at t=1 where a=120 and b=140. (b) An individual agent thinks that there is a high probability that the Dow Jones will have a payoff (or points) between a=34,000 and b-36,000 at t=1. 1=nd Design a digital option (see Figure 1) as a sequence of calls on the Dow that converges to a pure bet on getting $1 on the interval [34,000, 36,000]. ie, if the Dow lies between SE[34,000, 36,000] at t=1, then the portfolio of calls pays off exactly $1. The payoff is 0 otherwise. a+8 Figure 1 (Digital option) payoff a=34,000 b-36,000 S. Hint: You have to modify the sell strategies of a butterfly spread to obtain a payoff as given in Figure 2 and then adjust n and 8 appropriately.

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