Answer:
IRR = 13.05%
Explanation:
using an excel spreadsheet, the cash flows are:
year 0 = -$3,200,000
year 1 = $425,000
year 2 = $425,000 x 1.08 = $459,000
year 3 = $459,000 x 1.08 = $495,720
year 4 = $535,378
year 5 = $578,208
year 6 = $624,464
year 7 = $674,422
year 8 = $728,375
year 9 = $786,645
year 10 = $849,577
year 11 = ($849,577 x 1.08) - $480,000 = $917,543 - $480,000 = $437,543
IRR = 13.05%
The internal rate of return (IRR) is the discount rate at which a project's NPV (net present value) would equal $0.
Answer:
The annual rate of return of the invesment will be -14,97%
Explanation:
The initial investment is 45.000 and after 5 years the value of the investment is only 20.000. Here we can see a destruction of value (20.000 < 45.000). In finance, the time takes an essential part in calculation, so through the interest rate we calculated how bad was the investment in annual terms. The formula is as follows: Final investment value=(Initial investment*(1+interest rate)^(total years)) in our case would be: 20.000=(45.000*(1+interest rate)^(5)) From this formula we got -14,97%
Answer:
value of your total investment income 362.80
Explanation:
The computation of the value of your total investment income in two years is shown below
Value of Dividend after 2 years (200 × .20 × 1.07)42.80
Value of Liquidating Dividend (200 × 1.60) 320.00
value of your total investment income 362.80
The answer is a, a cash reserve