Undertake the investment opportunity

Assignment Help Financial Management
Reference no: EM131902300

Your brother wants to borrow $10,500 from you. He has offered to pay you back $12,000 in a year. If the cost of capital of this investment opportunity is 10% what is the NPV? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

Reference no: EM131902300

Questions Cloud

What benefit would the client derive from this arrangement : What benefit would the client derive from this arrangement?
Sausage system-what is the total cash flow in year seven : Dog Up! Franks is looking at a new sausage system with an installed cost of $503000. what is the total cash flow in year 7?
Expected returns of securities trading on the exchange : What effect, if any, would this tend to have on the price and expected returns of securities trading on the exchange?
What is the total cash flow in year four : If the shop's tax rate is 0.20 and its discount rate is 0.09, what is the total cash flow in year 4?
Undertake the investment opportunity : If the cost of capital of this investment opportunity is 10% what is the NPV? Should you undertake the investment opportunity?
Calculate the yield to maturity of ten bonds : Calculate the Yield to Maturity of 10 bonds that have a stated rate of 6 1/3%, mature in 5 1/2 years, and are currently priced at 102.244.
Arbitrage in restoring the covered interest parity condition : Explain the role of the covered interest arbitrage in restoring the covered interest parity condition.
What is the price of bond that is quoted by broker : What is the actual dollar price of a bond that is quoted by a broker at 103 6/15? What is the price of a bond that is quoted by a broker at 97.377?
Considering investment in clothes distributor : You are considering an investment in a clothes distributor. What does the IRR rule say about whether you should? invest?

Reviews

Write a Review

Financial Management Questions & Answers

  Share of preferred stock pays a constant dividend

Assume a share of preferred stock pays a constant dividend of $1.15. If the required return is 5%, what is the expected price of this preferred stock?

  Use the put and call options and the underlying stock

A stock price is $103 per share, exercise price of the options is $100 per share, all options are European and the stock does not pay any dividend. Option contracts are written on 100 shares of stock and mature in 6 months. The call price is $9 per s..

  What is the effective rate for the line of credit

If the firm borrows $1.9 million on the day the loan agreement is signed, what is the effective rate for the line of credit?

  Spot rate of the euro be in one year for your strategy

According to the IFE, what should the spot rate of euro in one year be. What must the spot rate of the euro be in one year for your strategy to be successful?

  Find arithmetic-geometric average growth rate of dividends

Find the arithmetic and geometric average growth rate of dividends. Then use the current stock price, recent dividend, and geometric growth rate to find the firm’s discount rate. Excel sheets/tables are fine to illustrate the information, but should ..

  Use net present value-accounting rate-of-return method

Smile photo, inc., is a nationally franchise company with over 50 outlets located in the southern states. part of the franchise agreement promises a centralized photo developing process with overnight delivery to the outlets. What kinds of informatio..

  Prepare your recommendation on agarwal cast company

Prepare your recommendation on Agarwal Cast Company - he could quote for higher profits, if he were willing to wait until completion of the job for payment.

  What is implied expected inflation rate during year three

Assume that a 3-year Treasury note has no maturity premium, what is the implied expected inflation rate during Year 3?

  Firm is planning to issue preferred stock

Your firm is planning to issue preferred stock. The? firm's cost of capital for the preferred stock.

  Spread between treasury securities and the yield on debt

In December 1995 Boise Cascade’s stock had a beta of 0.95. The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4%.  Assume the term structure of interest gives a 200 bp (basis point – a basis point is 1/100 of a %) spread bet..

  What is the length of the annuity time period

D’Angelo Barksdale is considering an annuity which costs $160,000 today. The annuity pays $17,500 a year at an annual interest rate of 7.50 percent. What is the length of the annuity time period?

  Risk reduction through diversification in portfolio

As the correlation between the stock returns increases, the risk reduction through diversification in a portfolio of two stocks:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd