#### You've reached the end of your free preview.

Want to read all 3 pages?

**Unformatted text preview: **Problem 9-11 a. What is the return expected on this investment measured in dollar terms if the opportunity cost rate is 20 percent? Cash flow PVIF PV 250 0.8333 208.325 400 0.6944 277.76 500 0.5787 289.35 600 0.4823 289.38 600 0.4019 241.14 1305.955 b. Provide an explanation in economic terms, of your answer. Use a factor in simplifying the present value of a series of values and the suitable PVIFs are displayed on the table form segregated by the individual period coupled with the interest rate combinations. The present value is thus computed via multiplication of PVIFs by the underlying cash flow. c. What is the return on this investment measured in percentage terms? =$1305.955-$1000/1000* 100% =305.955/1000*100% =0.305955*100% =30.60% d. Should this investment be made? Explain your answer. The investment should be made since the return on the investment is relatively impressive. Moreover, there is steady increase in the investment returns between the first year and the corresponding last year....

View
Full Document

- Spring '11
- John Ng'ethe