Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
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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Chapter 8, Problem 8.2WUE
Summary Introduction

To discuss:

Expected return

Introduction:

Return: In financial context, return is seen as percentage that represents the profit in an investment.

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Hide student question 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…
The FI’s initial balance sheet is assumed to be: "Picture 1" Duration of assets is 5 years and duration of liabilities is 3 years. If the manager learns from an economic forecasting unit that rates are expected to rise from 10 to 11% in the immediate future, what is the potential loss or gain to equity holders’ net worth?
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Chapter 8 Solutions

Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)

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