Question
Two investments have the following pattern of expected returns: Investment A Year 1 Year 2 Year 3 Year 4 Year 4 (Sale) BTCF $6,900 $11,900
Two investments have the following pattern of expected returns:
| Investment A | |||||
|---|---|---|---|---|---|
| Year 1 | Year 2 | Year 3 | Year 4 | Year 4 (Sale) | |
| BTCF | $6,900 | $11,900 | $13,900 | $16,900 | $139,000 |
| Investment B | |||||
|---|---|---|---|---|---|
| Year 1 | Year 2 | Year 3 | Year 4 | Year 4 (Sale) | |
| BTCF | $3,900 | $5,900 | $2,900 | $6,900 | $199,000 |
Investment A requires an outlay of $129,000 and Investment B requires an outlay of $139,000.
Required:
1a. What is the BTIRR on each investment?
b. If the BTIRR were partitioned based on BTCFo and BTCFs' what proportions of the BTIRR would be represented by each?
c. Which investment would be preferable?
Investment A Investment B
BTIRR _____% _____%
Investment A Investment B
BTIRR based on BTCF0 _____% ____%
BTIRR based on BTCFS ____% ____%
Preferable:
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Finance Capital Markets Financial Management And Investment Management
Authors: Frank J. Fabozzi, Pamela Peterson Drake
1st Edition
0470407352, 978-0470407356
