Consider the following project: Period 0 1 Net cash flow -125 0 2 81.55 3 104.79 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Period 1 2 3 Change in value (economic depreciation) Expected economic income

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question

Bhupatbhai 

Consider the following project:
Period
0
1
Net cash flow
-125
0
2
81.55
3
104.79
The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected
economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Period
1
2
3
Change in value (economic depreciation)
Expected economic income
Transcribed Image Text:Consider the following project: Period 0 1 Net cash flow -125 0 2 81.55 3 104.79 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Period 1 2 3 Change in value (economic depreciation) Expected economic income
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