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15. The XYZ Corporation is considering three alternative investments characterized by the data
shown in thee accompanying table. Note that the three investments hence equal initial cash
outlays, equal if times, and equal dollars Note that the pattern of returns are different for three
investments.
Alternatives
1 2 3
Initial
Investment $380,000 $380,000 $380,000
Cash inflows
Year 1 $180,000 $220,000 $140,000
Year 2 $180,000 $180,000 $180,000
Year 3 $180,000 $140,000 $220,000
Total cash
inflows $540,000 $540,000 $540,000
a. XYZ has a minimum desired rate of return on investment of 15 percent. Determine the NPV
of each of these investments and determine which meet the rate of return criteria
b. Use linear interpolation to estimate the actual rate of return for the three investment
alternatives
16. What is the present value of an income stream which provides Rs 2000 an year for the first five
years and Rs 3000 an forever thereafter, if the discount rate is 10%
17. A person requires Rs 20,000 at the beginning of the year from 2011 to 2015. How much should
he deposit at the end of each year from 2001 to 2006? The interest rate is 12%