Investments net present value and internal rate of return

Assignment Help Financial Management

Reference no: EM13812339

Management of a firm with a cost of capital of 12 percent is considering a $100,000 investment with an annual cash flow of $44,524 for three years.

a. What are the investment's net present value and internal rate of return?

b. The internal rate of the return assumes that each cash flow is reinvested at the internal rate of the return. The investment rate is achieved, what is the total value of cash flows at the end of the third year?

c. The net present technique assumes that each cash flow is reinvested at the firm's cost of capital. What would the total value of the cash flow at the end of the third year, if the funds are reinvested at the firm's cost of capital?

Reference no: EM13812339

Questions Cloud

Defences to the formation of valid and enforceable contract : Identify and discuss the various defences to the formation of a valid and enforceable contract. Discuss how a Christian leader would respond to the possibility of backing out of a contractual obligation through use of a legal “loophole.”

Forward rate forecast is tied to interest rate differential : Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the forward rate as a forecast of the future spot rate? Does the forward rate reflect a forecast of appreciation or depreciation of the Mexi..

What is each investments internal rate of return : What is each investments internal rate of return? Should the firm make any of these investments? What is each investments net present value? Should the firm make any of these investments?

Firm make according to the net present values : Which investment(s) should the firm make according to the net present values? Why? Which investment(s) should the firm make to the internal rates of return? Why? If all firms are reinvested at 15 percent, which investment(s) should the firm make? Wou..

Investments net present value and internal rate of return : Management of a firm with a cost of capital of 12 percent is considering a $100,000 investment with an annual cash flow of $44,524 for three years. What are the investment's net present value and internal rate of return?

Retirement goal : Sharon Frances Oliver estimates that she needs 10,000 per year to retire in 25 years. She expects to get 4% in her investment account. She expects to need the cash flows for 20 years until she dies. How much will she need to invest per year to reach ..

Current cost of common equity : Annieco's last dividend was $1.50 and is expected to grow at a 10% rate per year. The current stock price is $48. What is the current cost of common equity for this company?

Calculate cost of debt-cost of new common stock : Vosberg, Inc wants to calculate the component costs in its capital structure. Common stock currently sells for $33, and is expected to pay a dividend of $.40. Vosberg's dividend growth rate is 8%, and flotation cost is $1.25. Calculate cost of debt, ..

Invest per year to meet his goal-cruise around with top down : Aaron Knape Plans on buying a '64 Chevy Impala low rider for $60,000 in 8 years and thinks he can get 5% annually from his investments. How much should he invest per year to meet his goal and cruise around with the top down?

User Account

All Pages