FIN 402 MASTER 1 Predictable World / fin402master.com FIN 402 MASTER 1 Predictable World / fin402master. | Page 18
determine the preferred investment. Explain your findings. 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.
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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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