Investment A costs $10,000,000 and offers a single cash inflow of $13,000,000 after one year. Investment B

Question:

Investment A costs $10,000,000 and offers a single cash inflow of $13,000,000 after one year. Investment B costs $1,000,000 and will be worth $2,000,000 at the end of the year. The appropriate discount rate or required rate of return is 10 percent compounded annually.

Match the investment(s) listed below with the corresponding financial information in the items that follow.

A. Investment A.

B. Investment B.

C. Both A and B.

D. Neither A nor B.

1. ___ The net present value (NPV) is $818,182 and the internal rate of return is 30 percent.

2. ___ The NPV is $818,182 and the internal rate of return is 100 percent.

3. ___ The NPV is $1,818,182 and the internal rate of return is 30 percent.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...