In calculating the external rate of return by the modified rate of return approach, it is necessary to use two different rates of return, the investment rate ii and the borrowing rate ib. When is each used?
Answer to relevant QuestionsIn the modified rate of return approach for determining a single interest rate from net cash flows, state which interest rate is usually higher, the investment rate ii or the borrowing rate ib. State why.A company that makes clutch disks for race cars has the cash flows shown for one department.Year Cash Flow, $10000 .............. – 651 .............. 302 .............. 843 .............. – 104 ...Best Buy issued collateral bonds 4 years ago that have a face value of $20,000 each and a coupon rate of 8% per year, payable semiannually. If the bond maturity date is 20 years from the date they were issued and the ...Four years ago, Chevron issued $5 million worth of debenture bonds with a coupon rate of 10% per year, payable semiannually. Market interest rates dropped, and the company called the bonds (i.e., paid them off in advance) at ...A food processing company is considering two types of moisture analyzers. Only one can be selected. The company expects an infrared model to yield a rate of return of 27% per year. A more expensive microwave model will yield ...
Post your question