Reference no: EM133058384
1. You have an opportunity to invest $100,000 now in return for $80,000 in one year and $30,000 in two years. If your cost of capital is 9%, what is the NPV of this investment?
2. You have 3 projects with the following cash flows:
For which of these projects is the IRR rule reliable?
Estimate the IRR for each project (to the nearest 1%).
What is the NPV of each project if the cost of capital is 5%? 20%? 50%?
Project 1
Year 0: -150
Year 1: 20
Year 2: 40
Year 3: 60
Year 4: 80
Project 2
Year 0: - 825
Year 1: 0
Year 2: 0
Year 3: 7000
Year 4: -6500-6500
Project 3
Year 0: 20
Year 1: 40
Year 2: 60
Year 3: 80
Year 4: -245
3. The following table contains prices and dividends for a stock. All prices are after the dividend has been paid. If you bought the stock on January 1 and sold it on December 31, what is your realized return?
Price Dividend
Jan 1 10.00
Mar 31 11.00 0.20
Jun 30 10.50 0.20
Sep 30 11.10 0.20
Dec 31 11.00 0.20
4. The last four years of returns for a stock are as follows:
1 2 3 4
-4% +28% +12% +4%
What is the average annual return?
What is the variance of the stock's returns?
What is the standard deviation of the stock's returns?
5. You have $70,000. You put 20% of your money in a stock with an expected return of 12%, $30,000 in a stock with an expected return of 15%, and the rest in a stock with an expected return of 20%. What is the expected return of your portfolio?
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