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An investment is expected to produce the following annual year-end cash flows: Year 1 $ 5,000.00 Year 2 $ 1,191.00 Year 3 $ .00 Year
An investment is expected to produce the following annual year-end cash flows:
Year 1 | $ 5,000.00 |
---|---|
Year 2 | $ 1,191.00 |
Year 3 | $ .00 |
Year 4 | $ 5,540.00 |
Year 5 | $ 6,360.00 |
Year 6 | $ 1,483.32 |
The investment will cost $14,100 today.
Required: a. Will this investment be profitable? b. What will be the IRR (compounded annually) on this investment? c. Show how much of each years cash flow is recovery of the $14,100 investment and how much of the cash flow is return on investment. (Hint: See Exhibit 3-13 and Concept Box 3.2.)
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