DEVRY FIN 515 Week 3 Problem Set
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FIN 515 Week 3 Problem Set Chapter 7 ( pages 225 – 228 ):
1 . Your brother wants to borrow $ 10,000 from you . He has offered to pay you back $ 12,000 in a year . If the cost of capital of this investment opportunity is 10 %, what is its NPV ? Should you undertake the investment opportunity ? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged .
8 . You are considering an investment in a clothes distributor . The company needs $ 100,000 today and expects to repay you $ 120,000 in a year from now . What is the IRR of this investment opportunity ? Given the riskiness of the investment opportunity , your cost of capital is 20 %. What does the IRR rule say about whether you should invest ?
19 . You are a real estate agent thinking of placing a sign advertising your services at a local bus stop . The sign will cost $ 5,000 and will be posted for one year . You expect that it will generate additional revenue of $ 500 per month . What is the payback period ?