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Ivan Rivera 6.Unit2-Project

# Ivan Rivera 6.Unit2-Project - Ivan Rivera 6 MT480 Corporate...

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Ivan Rivera 6 MT480 – Corporate Finance Prof. Das Unit 2 Project Assignment Chapter 2: Question 3. Calculate the NPV and rate of return for each of the following investments. The opportunity cost of capital is 20 percent for all four investments. Investment Initial Cash Flow, C 0 Cash Flow in Year 1, C 1 1 _10,000 _18,000 2 _5,000 _9,000 3 _5,000 _5,700 4 _2,000 _4,000 a. Which investment is most valuable? b. Suppose each investment would require use of the same parcel of land. Therefore you can take only one. Which one? Hint: What is the firm’s objective: to earn a high rate of return or to increase firm value? Question 4. 4. In Section 2.1, we analyzed the possible construction of an office building on a plot of land appraised at \$50,000. We concluded that this investment had a positive NPV of \$5,000 at a discount rate of 12 percent.

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Ivan Rivera 6.Unit2-Project - Ivan Rivera 6 MT480 Corporate...

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