interest
2011-11-28 5:13 pm
A project requiring aninitial outlay of $15 000 is guaranteed to produce a return of $20 000 in three years’ time. Use the a) net present valueb)internal rate of return methods to decide whether this investmentis worthwhile if the prevailing market rate is 5% compounded annually. Wouldyour decision be affected if the interest rate was 12%?
回答 (1)
2011-11-29 4:20 pm
✔ 最佳答案
(a) -15000 + 20000/(1 + 5%)^3 = 2276.75197(b) Let the internal rate of return is x
-15000 + 20000/(1 + x)^3 = 0
x = 10%
If the interest rate is 12%, this means that the return of investment is less than put the money into the bank. So, I would not conduct the investment.
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