Question
Consider the following situation: A company starts with $12 million in cash. The interest rate is 15 per cent. The optimal policy for the company
Consider the following situation:
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A company starts with $12 million in cash.
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The interest rate is 15 per cent.
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The optimal policy for the company is to invest $6 million in assets.
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The net present value of this investment is $2 million. Answer the following questions:
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What are the marginal and average rates of return on the investment?
What are the marginal and average rates of return on the investment?
What is the total wealth of the company's shareholders immediately after the investment plan is announced?
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The Handbook Of Financial Modeling
Authors: Jack Avon
2nd Edition
1484265394, 978-1484265390
