Question

You have been offered a very long-term investment opportunity to increase your money one hundredfold. You can invest $800 today and expect to receive $80,000 in 40 years. Your cost of capital for this (very risky) opportunity is 23%.

What does the IRR rule say about whether the investment should be undertaken? What about the NPV rule? Do they agree?

What is the IRR?

Answer #1

Ch 7
You have been offered a very long-term investment opportunity
to increase your money one hundredfold. You can invest $ 1,000
today and expect to receive $ 100,000 in 40 years. Your cost of
capital for this (very risky) opportunity is 25 %. What does the
IRR rule say about whether the investment should be undertaken?
What about the NPV rule? Do they agree?
What is the IRR?
The IRR of this investment opportunity is _______%

You have been offered a very long-term investment opportunity to
increase your money one hundredfold. You can invest $1,700 today
and expect to $170,000 receive in 40 years. Your cost of capital
for this (very risky) opportunity is 25% . What does the IRR rule
say about whether the investment should be undertaken? What about
the NPV rule? Do they agree?
The IRR of this investment is ; (round to one decimal
place. i.e. write "12.34%" as "12.3%".)
According to IRR...

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?...

You have been offered an opportunity to invest in a new hydrogen
fuel-cell technology that is cheap, efficient, and produces no
carbon emissions. The initial cost is $55,000, and the project will
payoff $1.4 million in 30 years.
(a) Calculate the IRR of the project. If the cost of capital is
14 percent, would the IRR rule suggest you invest in this
project?
(b) Do the IRR rule and NPV rule agree? Explain.

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
$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 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
$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 became very successful just recently and are looking for
some promising investment. You have been offered the following
investment opportunity in China: if you invest $18,000 today, you
will receive $6,000 two years from now, $8,000 four years from now,
and $8,000 six years from now. a) What is the NPV of the
opportunity if the interest rate is 4% per year? Should you take
this opportunity? b) What is the NPV of the opportunity if the
interest rate...

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.

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