What is the internal rate of return on the investment

Assignment Help Financial Management
Reference no: EM131625392

Darrell has the opportunity to invest in KEN Co. He can invest $100 today, which returns to him $60 at the end of 1 year and another $60 at the end of 2 years. (The original investment is not returned except through these future payments.)

a. Suppose Darrell uses a 10% annual interest rate when discounting future payments. Calculate the present discounted value of this investment in KEN Co. Darrell learns of a second investment opportunity, this one in SPEN Co. , which requires him to invest $80 today, and then in 1 year it pays off $90. (The original investment is not returned except through the future payment.)

b. What is the (annual) internal rate of return on the investment in SPEN Co.

c. For what nonnegative (annual) interest rates is the present discounted value of the KEN Co investment larger than the present discounted value of the SPEN Co. investment?

Reference no: EM131625392

Questions Cloud

Calculate the company income taxes : The SGS Co. had $325,000 in taxable income. Calculate the company’s income taxes.
What is the amount of the firm net fixed assets : Current liabilities are $970, sales are $5,135, profit margin is 10.10 percent, and ROE is 17.40 percent. What is the amount of the firm's net fixed assets?
Rate of return accumulation to finance annual operations : A non-profit organization has an endowment of $13,000,000, which is invested as follows: use the rate of return accumulation to finance annual operations?
The initial investment cost be for this investment : How high could the initial investment cost be for this investment to have an NPV > 0?
What is the internal rate of return on the investment : What is the (annual) internal rate of return on the investment in SPEN Co.
What are the firm expected cash receipts : what are the firm's expected cash receipts for June, July, and August?
What is the present value of this net-profit stream : What is the present value of this net-profit stream at 9% and the annual worth each period?
What is the operating cash flow or OCF : Hailey, Inc., has sales of $19,660, costs of $9,370, depreciation expense of $2,040, and interest expense of $1,530. What is the operating cash flow, or OCF?
Who loses when a firm becomes too big to fail : Who benefits and who loses when a firm becomes too big to fail?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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