If a project's IRR is 13% and the project provides annual cash flows of $15,000 for 4 years, how much did the project cost?
1 answer:
Answer: a. $44,617
Explanation:
The Internal Rate of Return brings the NPV of a project to zero which means that the cost of the project will be the Net present value of the cash inflows using the IRR as the discount rate.
This is a constant payment so can be treated as an annuity.
Present value of annuity = Annuity * Present value interest factor of annuity, 4 years , 13%
= 15,000 * 2.9745
= 44,617.5
= $44,617 approx
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Answer:
1. Assets is debited for $10,000 as loans.
2. Liabilities is credited for $10,000 as deposits.
Explanation:
Note: This question is not complete as the amount is omitted. The complete question is therefore presented before answering the question as follows:
Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open market purchase of $10000 from Bank 1.
Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction.
The explanation of the answer is now given as follows:
Note: See the attached photo for Bank 1's T-Account.
In the attached photo, we can see that:
1. Assets is debited for $10,000 as loans.
2. Liabilities is credited for $10,000 as deposits.
