1- Long-term investment decision, IRR method: Personal Finance Problem Billy and Mandy Jones have

$26,000 to invest. On average, they do not make any investment that will not return at least

7.8% per year. They have been approached with an investment opportunity that requires

$26,000 upfront and has a payout of $6,100 at the end of each of the next 5 years. Using the internal rate of return (IRR) method and their requirements, determine whether Billy and Mandy should undertake the investment.

The internal rate of return (IRR) of this investment opportunity is nothing %.

Eceeds or does not ecceed

Acceptable or not acceptable

2-Payback, NPV, and IRR

Rieger International is attempting to evaluate the feasibility of investing

$108,000 in a piece of equipment that has a 55-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table:

Year

(t)

Cash inflows (CF)

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1

$35,000

2

$30,000

3

$25,000

4

$25,000

5

$40,00

.

The firm has a

11%

cost of capital.

a.Calculate the payback period for the proposed investment.

b.Calculate the net present value (NPV) for the proposed investment.

c.Calculate the internal rate of return (IRR),rounded to the nearest whole percent, for the proposed investment.

d.Evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relative to implementation of the project?

3- Time to repay installment loan Personal Finance Problem Mia Salto wishes to determine how long it will take to repay a loan with initial proceeds of $10,000 where annual end-of-year installment payments of $1,589 are required.

a.If Mia can borrow at an annual interest rate of 12% how long will it take for her to repay the loan fully?

b.How long will it take if she can borrow at an annual rate of 9%?

c.How long will it take if she has to pay 15% annual interest?

d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.