You are offered an investment that will pay $200 in year 1, $400 the next...
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• You are offered an investment that will pay $200 in year 1, • $400 the next year, • $600 the following year, and $800 at the end of the 4th year. • You can earn 12% on similar investments. • What is the most you should pay for this one? · Your broker calls you and tells you that he has this great investment opportunity. If you invest $100 today, you will receive $40 in one year and $75 in two years. e If you require a 15% return on investments of this risk, should you take the investment? Suppose you are looking at the following S possible cash flows: 212 100 200 200 200 30. • Year 1 CF = $100; • Years 2 and 3 CFs = $200; • Years 4 and 5 CFs = $300. The required discount rate is 7% • What is the value of the CFs at year 5? • What is the value of the CFs today? · • You are offered an investment that will pay $200 in year 1, • $400 the next year, • $600 the following year, and $800 at the end of the 4th year. • You can earn 12% on similar investments. • What is the most you should pay for this one? · Your broker calls you and tells you that he has this great investment opportunity. If you invest $100 today, you will receive $40 in one year and $75 in two years. e If you require a 15% return on investments of this risk, should you take the investment? Suppose you are looking at the following S possible cash flows: 212 100 200 200 200 30. • Year 1 CF = $100; • Years 2 and 3 CFs = $200; • Years 4 and 5 CFs = $300. The required discount rate is 7% • What is the value of the CFs at year 5? • What is the value of the CFs today? ·
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Answer Part 1 To find the most you should pay for this investment we need to calculate the present value of the cash flows using the given discount rate of 12 Year 1 200 Year 2 400 Year 3 600 Year 4 8... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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