An investment is expected to produce the following annual year-end cash flows: year 1: $5,000 year 4:
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Question:
An investment is expected to produce the following annual year-end cash flows:
year 1: $5,000 year 4: $5,000
year 2: $1,000 year 5: $6,000
year 3: $0 year 6: $863.65
The investment will cost $13,000 today.
a. Will this investment be profitable?
b. What will be the IRR ( compounded annually ) on this investment?
c. Prove your answer in ( b ) by showing how much of each year’s cash flow is recovery of the
$13,000 investment and how much of the cash flow is return on investment.
Related Book For
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
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