Question: Adam has a project in mind that will require $100 of investment. The project will last for only one year and cease existence after that.
Adam has a project in mind that will require $100 of investment. The project will last for only one year and cease existence after that. Adam has only $50 of his own money and he needs to attract the remaining $50 by borrowing it from his buddy Bob. The loan has a 10% annual interest rate. Suppose that there are four possible scenarios regarding the end-of-year cash generated by the business project: 1) $140, 2) $100, 3) $80, and 4) $40. Compute rate of return (RoR) in each scenario for Adam and for Bob.
The correct answer is : See the table below. Scenario Adams RoR, % Bobs RoR, % #1 70 10 #2 -10 10 #3 -50 10 # 4 -100 -20
I just dont know how to get to the correct answer. Please show me using a financial calculator. Thank you!
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