# Question: Elliott Dumack must earn a minimum rate of return of

Elliott Dumack must earn a minimum rate of return of 11% to be adequately compensated for the risk of the following investment.

Initial Investment $14,000

End of Year Income ($)

1 .......... 6,000

2 .......... 3,000

3 .......... 5,000

4 .......... 2,000

5 .......... 1,000

a. Use present value techniques to estimate the yield on this investment.

b. On the basis of your finding in part a, should Elliott make the proposed investment? Explain.

Initial Investment $14,000

End of Year Income ($)

1 .......... 6,000

2 .......... 3,000

3 .......... 5,000

4 .......... 2,000

5 .......... 1,000

a. Use present value techniques to estimate the yield on this investment.

b. On the basis of your finding in part a, should Elliott make the proposed investment? Explain.

## Relevant Questions

Assume that an investment generates the following income stream and can be purchased at the beginning of 2014 for $1,000 and sold at the end of 2020 for $1,200. Estimate the yield for this investment. If a minimum return of ...Assuming you purchased a share of stock for $50 one year ago, sold it today for $60, and during the year received 3 dividend payments totaling $2.70, calculate the following. a. Income b. Capital gain (or loss) c. Total ...a. Assuming that investments A and B are equally risky and using the 12% discount rate, apply the present value technique to assess the acceptability of each investment and to determine the preferred investment. Explain your ...For each of the savings account transactions in the accompanying table on page 163, calculate the following. a. End-of-year account balance. (Assume that the account balance at December 31, 2013, is 0.) b. Annual interest, ...Kent Weitz wishes to assess whether the following 2 investments are satisfactory. Use his required return (discount rate) of 17% to evaluate each investment. Make an investment recommendation to Kent.Post your question