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Verdich [7]
2 years ago
8

You are offered a chance to buy (cash outflow) an asset for $200,000 that is expected to produce cash inflows of $100,000 at the

end of Year 1, $77,000 at the end of Year 2, $52,000 at the end of Year 3, and $40,000 at the end of Year 4. What rate of return (IRR) would you earn if you bought this asset?
Business
1 answer:
madreJ [45]2 years ago
7 0

Answer:

15.65%

Explanation:

The computation of the internal rate of return is shown below:

Given that

Years        Cash outflow/ cash inflow

0                 -$200,000

1                   $100,000

2                 $77,000

3                  $52,000

4                 $40,000

The formula is

= IRR()

AFter applying the above formula, the internal rate of return is 15.65%

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FisherCo is intending to invest in a new project. The hurdle rate is the minimum rate of return the firm will accept on this project.

The hurdle rate is the minimum rate of return a project must have in order for a project to be accepted. It can also be referred to as the discount rate or the required rate of return or the cost of capital.

When the hurdle rate is greater than the internal rate of return of a project, the project would be rejected. If the hurdle rate is less than the internal rate of return of a project, the project would be accepted.

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2 years ago
The present value of a lump sum future amount:__________
SVEN [57.7K]

Answer:

  • <u><em>d) increases as the interest rate decreases.</em></u>

Explanation:

<em>Present value</em> is the value today; future value is the value some time in the future.

The mere notion of the value of money in time should tell you that, further away in time (towards the future) a sum of money is found, the lower its value today.

Then, you should be able to rule out some propositions that are contrary to that intuition:

  • a<em>) decreases as the time period decreases</em> ↔ clearly false: the present value increases as the time period decreases
  • <em>e) is directly related to the time period</em>. ↔ clearly false: the present value is inversely related to the time period.

How is the present value related to the future value?

They are directly related: the higher a lump sum in the future the higher the value of it in the present; more money is more money always. More money in the future has more value in the present; less money in the future has less value in the present. Thus,  the option <em>b). is inversely related to the future value</em> is false

How is the present value related to the interest rate?. Which one is true?

  • c) is directly related to the interest rate, or
  • d) increases as the interest rate decreases

The present value is calculated discounted the future value at the interest rate. The interest rate is in the denominator of the equation to pass from future value to present value. Thus, they are inversely related (c is false); the less the interest rate, the higher the present value of a future amount (confirm d is true).

Therefore, the correct answer is that <em>the present of a lump sum future amount: </em><em><u>d) increases as the interest rate decreases.</u></em>

<u />

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As the employees at NeiFra Infosystems Inc. have been struggling to provide quality services to clients. An investigation reveals that employees feel dissatisfied and fatigued due to the challenging nature of their jobs. Ellen, the HR manager, suggests simplifying jobs in order to reduce errors and increase accuracy. Using software that helps with tracking progress can simplify the mental demands of employees' jobs. With the help of software, they can not only easily make the patterns but also can easily identify the main problems in a more effective and efficient way. Software can help NeiFra Infosystems Inc. in getting knowledge about the reasons of the employee's dissatisfaction in a more quick and fast way, which if they do it manually can take lot of time and unnecessary efforts.

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