Turner Video will invest $48,500 in a project. The firm's discount rate (cost of capital) is 9

Question:

Turner Video will invest $48,500 in a project. The firm's discount rate (cost of capital) is 9 percent. The investment will provide the following inflows:
1 .............$10,000
2 ...............12,000
3 ...............16,000
4 ...............20,000
5 ...............24,000
The IRR is 14 percent.
a. If reinvestment is assumed at the cost of capital rate used by the NPV method, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.)
b. If the reinvestment is assumed at the IRR, what will be the total value of the inflows after five years?
c. Generally, is one reinvestment assumption likely to be better than another?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...

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