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Island return on investment

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-Suppose you have the opportunity to invest in a project that provides you with $4,000 every year forever. If you require an 8% return on investments with similar risk, what is the most you would be willing to pay for this project?

-Suppose you have an opportunity to invest $1,000 today and get $1,200 one year from today. If your required rate of return on investments of similar risk is 10%, should you make this investment? Why?

-Island Corporation invested $1,000,000 in a new product on January 1, 2020. This product generated cash flows of $800,000 the first year, $400,000 the second year, and $200,000 the third year. At the end of the third year, Island abandoned the new product and disposed of the production equipment for $400,000 at the end of the third year. If these are the only cash flows from this new product, what was Island's return on their investment in this product?

Reference no: EM132554972

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