Calculate expected rate of return for this investment

Assignment Help Financial Management

Reference no: EM131591240

A research project would require initial investment of 100,000. There are three possible outcomes for this project:

1) 30% probability that investment yields annual income of 35,000 for six year (starting from year 1 to year six) and zero salvage value

2) 50% probability that investment yields annual income of 25,000 for six year (starting from year 1 to year six) and zero salvage value

3) 20% probability of failure that yields zero annual income but salvage value of 75,000 dollar at the end of year 1

Calculate expected Rate of Return for this investment. Explain your work in detail including all the required equations and calculations.

Reference no: EM131591240

Questions Cloud

What interest rate does the bond offer : What interest rate does the bond offer? Interest rate %

What do you think of the proposal : We believe we can sell 90,000 home security devices per year at $150 per piece. What do you think of the proposal?

Which project will yield the highest net present value : Two mutually exclusive projects are available for an investment of $4,900 each. which project will yield the highest net present value?

What dependent variable was used and how is it measured : What is the null hypothesis for your question - What research design would align with this question and what dependent variable was used and how is it measured?

Calculate expected rate of return for this investment : A research project would require initial investment of 100,000. Calculate expected Rate of Return for this investment.

What is the npv of the? contract : After spending $10,000 on? client-development, you have just been offered big production contract by new client. What is the NPV of the? contract?

Contracts does statute of frauds require to be in writing : Which contracts does the Statute of Frauds require to be in writing?

Discuss philosophic foundations and daily operations : Drawing on your readings for this week and your experiences at your current school, evaluate your personnel, facilities, programs, etc. using the aforementioned model.

Decrease the further into the future the forecast : The accuracy of financial forecasts tends to decrease the further into the future the forecast.

User Account

All Pages