Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Question
Chapter 8, Problem 8.1P
a)
Summary Introduction
To discuss:
Introduction:
Return: In financial context, return is seen as percentage that represents the profit in an investment.
b)
Summary Introduction
To discuss:
Recommended investment.
Introduction:
Return: In financial context, return is seen as percentage that represents the profit in an investment.
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Issue #11: Comparison of Returns on $200000 and 5.5% on$70,000
Investors, as reasonable economic creatures commit toinvestment portfolios with the expectation of earning valuable returns. Keon as a logical investor believes his investment should provide the best value of rewards and is considering which option to invest in. The expected returns should be something similar or equal to his historical gain of 9% per annum.
If Keon should leave $70,000 in the safe investment , his only expected return will be $3,850 (70,000*5.5%) in nominal terms per annum.
However, if he invests the $200,000 by going entrepreneurial, Keon can potentially make a significant gain as per below.
Return on Investment (ROI)
ROI = Net Income * 100 Cost of Investment
Cost of investment = $200, 000
Cost of 1 Limousine = 80,000
Total Cost of Limousines = (80,000*4) = 320,000
Useful Life of 1 Limousine = 20 yrs
Depreciation per year = 80,000 = 4,000 20…
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Question 5
Investment products have different probabilities of success. A businessman wishes
to invest in two different products, A and B. The following table shows the
probability distributions, where P(a, b) represents the probability of success of the
ith investment of A and the ih investment of B, for the values (in thousands of GH¢)
for A and B invested in 4 different years. Base on this information:
(a)
(b)
(c)
A
B
P(a,b)
3
6
0.3
2
4
0.2
5
3
0.4
1
2
0.1
Which of the investments has a better return and why?
Which of the investments is relatively less risky and why?
What type of association exists between the two investment options A and
B? Interpret your results.
Chapter 8 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 8.1 - Prob. 1FOECh. 8.1 - What is risk in the context of financial decision...Ch. 8.1 - Prob. 8.2RQCh. 8.1 - Prob. 8.3RQCh. 8.2 - Explain how the range is used in scenario...Ch. 8.2 - Prob. 8.5RQCh. 8.2 - Prob. 8.6RQCh. 8.2 - What does the coefficient of variation reveal...Ch. 8.3 - What is an efficient portfolio? How can the return...Ch. 8.3 - Prob. 8.9RQ
Ch. 8.3 - How does international diversification enhance...Ch. 8.4 - Prob. 8.11RQCh. 8.4 - Prob. 8.12RQCh. 8.4 - Prob. 8.13RQCh. 8.4 - What impact would the following changes have on...Ch. 8 - Prob. 1ORCh. 8 - Prob. 8.1STPCh. 8 - Prob. 8.2STPCh. 8 - Prob. 8.1WUECh. 8 - Prob. 8.2WUECh. 8 - Prob. 8.3WUECh. 8 - Prob. 8.4WUECh. 8 - Prob. 8.5WUECh. 8 - Prob. 8.6WUECh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Learning Goal 2 P8-6 Bar charts and risk Swans...Ch. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 8.12PCh. 8 - Prob. 8.13PCh. 8 - Prob. 8.14PCh. 8 - Learning Goal 4 P8- 15 Correlation, risk, and...Ch. 8 - Prob. 8.16PCh. 8 - Learning Goal 5 P8- 17 Total, nondiversifiable,...Ch. 8 - Prob. 8.18PCh. 8 - Prob. 8.19PCh. 8 - Prob. 8.20PCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.22PCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.27PCh. 8 - Learning Goal 6 P8- 28 Security market line (SML)...Ch. 8 - Prob. 8.29PCh. 8 - Prob. 8.30PCh. 8 - Prob. 8.31PCh. 8 - Prob. 1SE
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