Question

Question #8: You are offered the following investment opportunity: • Invest $425 today • Receive $100...

Question #8: You are offered the following investment opportunity:

• Invest $425 today

• Receive $100 at the end of Year 1; receive $200 at the end of year 3; and receive $350 at the end of Year 6

• You want to earn a required return of 13%

Required: a) Should you invest in this opportunity?

b) Why or Why not?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Soluton:

Lets contruct a table showing the pv of all cash flows at 13% discount rate

Should not invest in this opportunity as we are not getting the required returns from the investment. A negative NPV shows that the capital is not realising the required rate of return.

Hope this helps! In case of any clarifications, kindly use the comment box below

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question #7: Your broker called and offered you the following investment opportunity: • You will have...
Question #7: Your broker called and offered you the following investment opportunity: • You will have to invest $1,000 today • In 7 years the investment will end and you will be paid $1,375 • You will receive no payments until the end of the investment in 7 years Required: Determine the Implied Interest rate that you will earn on this investment.
You have been offered a unique investment opportunity. If you invest $11,700 ?today, you will receive...
You have been offered a unique investment opportunity. If you invest $11,700 ?today, you will receive $585 one year from? now, $1,755 two years from? now, and $11,700 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 6.7 % per? year? Should you take the? opportunity? b. What is the NPV of the opportunity if the cost of capital is 2.7 %per? year? Should you take it? now?
You have been offered a unique investment opportunity. If you invest $ 8 comma 100$8,100 ​today,...
You have been offered a unique investment opportunity. If you invest $ 8 comma 100$8,100 ​today, you will receive $ 405$405 one year from​ now, $ 1 comma 215$1,215 two years from​ now, and $ 8 comma 100$8,100 in ten years.a. What is the NPV of the opportunity if the cost of capital is 6.7 %6.7% per​ year? Should you take the​ opportunity?b. What is the NPV of the opportunity if the cost of capital is 2.7 %2.7% per​ year?...
You have been offered a unique investment opportunity. If you invest $11,800 ?today, you will receive...
You have been offered a unique investment opportunity. If you invest $11,800 ?today, you will receive $590 one year from? now, $1,770 two years from? now, and $11,800 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 5.8 % per? year? Should you take the? opportunity? b. What is the NPV of the opportunity if the cost of capital is 1.8 %1.8% per? year? Should you take it? now?
You have been offered a unique investment opportunity. If you invest 13,000 today, you will receive...
You have been offered a unique investment opportunity. If you invest 13,000 today, you will receive $650 one year from now, $1950 two years from now, and $13000 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 7.1% per year? Dhould you take the opportunity? b. What is the NPV of the opportunity if the cost of the capital is 3.1% per year? Should you take it now?
You have been offered a unique investment opportunity. If you invest  $8,100 today, you will receive  $405 one...
You have been offered a unique investment opportunity. If you invest  $8,100 today, you will receive  $405 one year from now,  $1,215 two years from now, and $8,100 ten years from now. What is the NPV of the opportunity if the cost of capital is 1.2% per year?
You have been offered a unique investment opportunity. If you invest $ 10 800 ​today, you...
You have been offered a unique investment opportunity. If you invest $ 10 800 ​today, you will receive $ 540 one year from​ now, $ 1 620 two years from​ now, and $ 10 800 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 5.9 % per​ year? Should you take the​ opportunity? b. What is the NPV of the opportunity if the cost of capital is 1.9 % per​ year?...
U2 – 20 / Suppose you invest $4,000 today and receive $9,750 in five years. a....
U2 – 20 / Suppose you invest $4,000 today and receive $9,750 in five years. a. What is the internal rate of return? (IRR) of this? opportunity? The IRR of this opportunity is ____% (Round to two decimal? places.) b. Suppose another investment opportunity also requires $4,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first? one, what is the amount you...
You are offered a four-year investment opportunity costing $100,000 today. The investment will pay $25,000 in...
You are offered a four-year investment opportunity costing $100,000 today. The investment will pay $25,000 in the first year, $27,000 in the second year, $30,000 in the third year, and $40,000 in the fourth year. Investments of comparable risk require a 10% rate of return in the financial market. Should you accept the investment opportunity and why? A. Yes, those cash payments look good to me because they add up to $122,000. B. Yes, because the investment’s cash payments represent...
Question 3 Unsaved You have been offered the opportunity to invest in a project that will...
Question 3 Unsaved You have been offered the opportunity to invest in a project that will pay $1,067 per year at the end of years one through three and $9,409 per year at the end of years four and five. These cash flows will be placed in a saving account that pays 8.22 percent per year. What is the future value of this cash flow pattern at the end of year five?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT