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Katen [24]
3 years ago
5

You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $ 10 milli

on. Investment A will generate $ 2.4 million per year​ (starting at the end of the first​ year) in perpetuity. Investment B will generate $ 1.8 million at the end of the first​ year, and its revenues will grow at 4.5 % per year for every year after that. Use the incremental IRR rule to correctly choose between investments A and B when the cost of capital is 6.4 %. At what cost of capital would your decision​ change?
Business
1 answer:
Lana71 [14]3 years ago
8 0

Answer:

A)Choose A B) Choose B C) 0.45

Explanation:

We will use the NPV formula to calculate the IRR and them choose investment opportunity with a high IRR

NPV (A)=CF/R -II

       0 =2.4/r -10 m

        r=0.24/24%

NPV(B)=1.8/r-0.045-10

         0=1.8/r-0.045-10

          r=0.135/13.5%

Therefore choose A

B)NPV (A)

=2.4/0.064-10

=$27.5 MIL

NPV (B)

=1.8/0.064-0.045 -10

=1.8/0.019-10

=$84.74 MIL

Therefore choose B as it has higher NPV

C) Equate the NPV to in order to calculate the cost of capital

2.4/r -10 =1.8/r-0.045 -10

2.4/r=1.8/r-0.045

1.8r=2.4r-0.108

0.6r=0.108

r=0.556/5.56%

=

       

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The answer is: individual characteristics

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From markings and cuts and the sole, investigators could predict the general activities that usually done by the owner of the shoe. This would helped them identify the victim and help to unfold what happened to that victim when the crime occurred.

6 0
3 years ago
Gabriele Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and se
iVinArrow [24]

Answer:

Coupon rate = 5.8%

Explanation:

The price of a bond is the present value (PV)  of the future cash flows discounted at its yield.

So we will need to work back to ascertain the coupon rate

Step 1

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<em>PV of Redemption </em>

= 1.067^(-5) × 1000

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<em>PV of the annual interest rate</em>

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Step 2

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Interest payment = PV of redemption value / annuity factor

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<em>Annuity factor at 6.7% for 5 years</em>

Factor =( 1-1.067^(-5) )/0.067

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=58.290

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4 0
3 years ago
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Answer:

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Explanation:

8 0
2 years ago
Given one or more hypothetical assumptions, a responsible party may prepare, to the best of his knowledge and belief, an entity'
Sergeeva-Olga [200]

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It also helps in developing the various types of short term financial based projection that for the purpose of internal marketing information.

The importance of the financial projection is that it helps in preparing the basic finance base statement by predicting the firm's outcome. Therefore, Financial projections is the correct answer.

 

5 0
3 years ago
Assume that for a certain product, brand a has 15% market share, brand b has 20% market share, and brand c has 65% market share.
tiny-mole [99]
Brand B market share is now at 14%

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b = 20-4*1.5
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4 0
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