Maria Espinosa borrowed $15,000 from the bank and agreed to repay the loan at 8 percent annual interest over four years, making payments of $4,529 per year. Because part of the bank’s payment from Ms. Espinosa is a recovery of the original investment, what assumption must the bank make to earn its desired 8 percent compounded annual return?
Answer to relevant QuestionsTwo investment opportunities have positive net present values. Investment A’s net present value amounts to $40,000 while B’s is only $30,000. Does this mean that A is the better investment opportunity? Explain.What is the relationship between desired rate of return and internal rate of return?Identifying cash inflows and outflowsRequiredIndicate which of the following items will result in cash inflows and which will result in cash outflows. The first one is shown as anexample.Perez and Soto (P&S) is a partnership that owns a small company. It is considering two alternative investment opportunities. The first investment opportunity will have a five-year useful life, will cost $7,001.31, and will ...Sophia Sweeny, the president of Sweeny Enterprises, is considering two investment opportunities. Because of limited resources, she will be able to invest in only one of them. Project A is to purchase a machine that will ...
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