Calculate the internal rate of return and net present value

Assignment Help Macroeconomics

Reference no: EM1368698

Get Rich Corporation has to choose between two investment opportunities. Investment A requires an immediate cash outlay of $100,000 and provides after-tax income of $20,000 per year for 10 years. Investment B requires an immediate cash outlay of $1,000 and generates after-tax income of $350 per year for five years.

Required:
1. Using a cost of capital of 12%, calculate the net present value of each investment, and determine which one Get Rich should select.
2. Calculate the internal rate of return of each investment. On the basis of this method, which investment should Get Rich select?
3. Interpretive Question: How do you account for the difference in rankings? Under the circumstances, which method would you rely on for your decision?

Reference no: EM1368698

Questions Cloud

What are the major threats to the companys ability : What are the major threats to the company's ability to serve its stakeholders and make its mission a reality?

Question about riordan manufacturing : The influence of the organizations financial condition on the total compensation and question about Riordan Manufacturing

Compute the retrained earnings : Edgemont Company had revenues of $230,000 and expenses, including income taxes, of $190,000. On December 31, 2005 Edgemont had assets of $350,000,

Question about recapitalization : Cronwell Enterprises has total assets of $300 million. The corporation currently has no debt in its capital structure. The company's basic earning power is 15%.

Calculate the internal rate of return and net present value : Get Rich Company has to choose between two investment opportunities. Investment A requires an immediate cash outlay of $100,000 and provides after-tax income of $20,000 per year for ten-years.

How might argumentation differ in the classroom : Argumentation and Influence - School, Work, Home - How might argumentation differ in the classroom, daily life, and your job? To demonstrate this, select a position from a current event with which you are familiar.

Analyzing ricardian trade model : Ricardo believed that the target of economic analysis was to understand the distribution of income between three major classes: capitalists, workers, and landowners.

Show the : CS founders Gil and Hannah both realize that word of mouth and the few advertisements and reviews they have received is really not enough to propel the demand sufficiently to stay in business very long.

Question related to medical office procedures : Prepare a new office protocol pertaining to billing and cash management and describe the relationship of the new protocol with other existing polices

User Account

All Pages