Question
You are considering a safe investment opportunity that requires a $ 910 $910 investmenttoday, and will pay $ 990 $990 two years from now and
You are considering a safe investment opportunity that requires a $ 910
$910 investmenttoday, and will pay $ 990
$990 two years from now and another $ 790
$790 five years from now.
a. What is the IRR of thisinvestment?
b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5 %
5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of theinvestment? Explain.
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Corporate Finance The Core
Authors: Jonathan Berk, Peter DeMarzo
4th Global Edition
1292158336, 9781292158334
