What is the irr on the investment in spen co

Reference no: EM131797974

Question: 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: EM131797974

Questions Cloud

Hypothesis of randomness against the alternative : Use the method of runs above and below the median to test the null hypothesis of randomness against the alternative that there is a trend.

What is the net present value of the supplemental investment : CVC is contemplating subsidizing large scale pine plantations by private landowners who own the surrounding denuded hillsides.

Difference between the crop yields : Specify the competing hypotheses to determine whether the median difference between the crop yields differs from zero.

Complete the budgeted cash receipts and disbursements : Techlabs operates a computer training center. Complete the following budget: Budgeted Cash Receipts and Disbursements For January 2012

What is the irr on the investment in spen co : 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.

Portion of the returns for fidelity equity income : The table below shows a portion of the returns for Fidelity's Equity Income mutual fund and Vanguard's Equity Income mutual fund from 2000 through 2010

Explain the purpose of a p-two audit : Your audit should include an introductory paragraph explaining both the purpose of a P2 audit and the reasons for including the steps that you have selected.

What are the benefits and costs of micro financing : What are the benefits and costs of micro financing? Does it really encourage entrepreneurship in these countries?

Discuss an employee of another local accounting firm : Kent's friend, an employee of another local accounting firm, prepares Fort's Tax return

User Account

All Pages