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Unformatted text preview: a) investment value 7. An income-producing property is priced at $600,000 and is expected to generate the following after-tax cash flows: Year-1: $42,000; Year-2: $44,000; Year-3: $45,000; Year-4: $50,000; and Year-5: $650,000. Would an investor with a required after-tax rate of return of 15 percent be wise to invest at the current price? b) No, the NPV is -$148,867. 1 Chapter 19: Investment Decisions: NPV and IRR 8. As a general rule, using financial leverage: b) increases risk to the equity investor. 9. What is the IRR, assuming an industrial building can be purchased for $250,000 and is expected to yield cash flows of $18,000 for each of the next five years and be sold at the end of the fifth year for $280,000? c) 9.20% 10. Which of the following is the least true? c) After-tax discount rates are less than discount rates used to value before-tax cash flows. 2...
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This note was uploaded on 04/25/2010 for the course FIN 497 taught by Professor Clements during the Spring '10 term at University of Missouri-Kansas City .
- Spring '10