Question
Halla Enterprises is considering the following three investments: Let's say the appropriate discount rate for the...
Halla Enterprises is considering the following three investments: Let's say the appropriate discount rate for the investment is 15%.
| Year | Cash Flow | |||||
| 0 | -6,000 | -10,000 | -4,000 | |||
| 1 | 3,000 | 2,000 | 1,000 | |||
| 2 | 3,000 | 4,000 | 4,000 | |||
| 3 | 3,000 | 8,000 | 6,000 | |||
| 4 | 3,000 | 6,000 | 0 | |||
| 5 | 3,000 | 1,000 | 0 | |||
1. Calculate the net present value of each investment.
2. What is the internal return on each investment?
3. Which investment plan do you think is the most economical? Explain its validity.
Homework Answers
Answer #1
1. First investment is recommended because it generate highest NPV among three even though it conflicts with IRR because return of 53.64% is not possible in any market
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