Question
Turner Video will invest $94,500 in a project. The firms cost of capital is 10 percent. The investment will provide the following inflows. Use Appendix
| Turner Video will invest $94,500 in a project. The firms cost of capital is 10 percent. The investment will provide the following inflows. Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods. |
| Year | Inflow |
| 1 | $ 33,000 |
| 2 | 35,000 |
| 3 | 32,000 |
| 4 | 38,000 |
| 5 | 45,000 |
| The internal rate of return is 25 percent. |
| a. | If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.) (Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Total value of inflows | $ |
| b. | If the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years? (Use the given internal rate of return. Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Total value of inflows | $ |
| c. | Which investment assumption is better? | ||||
|
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Listed Volatility And Variance Derivatives
Authors: Yves Hilpisch
1st Edition
1119167914, 978-1119167914
