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b. Recognizing that investment B is more risky than investment A,
reassess the two alternatives, adding the 4% risk premium to the
4% discount rate for investment A and therefore applying a 8%
discount rate to investment B. Compare your findings relative to
acceptability and preference to those found for question a.
c. From your findings in questions a and b, indicate whether the IRR
for investment A is above or below 4% and whether that for
investment B is above or below 8%. Explain.
d. Use the present value technique to estimate the IRR on each
investment. Compare your findings and contrast them with your
response to question c.
e. From the information given, which, if either, of the two
investments would you recommend that Dave make? Explain your
answer.
f. Indicate to Dave how much money the extra $50 will have grown
to by the end of 2026, assuming he makes no withdrawals from the
savings account.
g. ------------------------------------------------------------------------------
FIN 402 Week 2 Assignment Case Problem 4.1, 4.2, 2.1, 5.2,
13.1 (Part a,b,c,d)
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FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision