The cash flow for a company for their investment account is shown in the table below: Cash Year Cash Inflow Outflow $50,000 ($2,000) 1 Q ($5,100) 3Q ($4,500) $1,600 (36Q) 4 $0 $0 5 12Q ($8,500) 20Q ($4,500) 7 $7,500 ($6,500) 8 $0 (16Q) a. If the value of Q is $2,000 at what interest rate will the net cash flow be balanced and equivalent? (Hint: at what interest rate per year NPW is equal to zero) b. If the interest rate is 5% per year compounded yearly, for what value of Q will the cash flow have equivalence? (Hint: for what value of Q, NPW is equal to zero)
The cash flow for a company for their investment account is shown in the table below: Cash Year Cash Inflow Outflow $50,000 ($2,000) 1 Q ($5,100) 3Q ($4,500) $1,600 (36Q) 4 $0 $0 5 12Q ($8,500) 20Q ($4,500) 7 $7,500 ($6,500) 8 $0 (16Q) a. If the value of Q is $2,000 at what interest rate will the net cash flow be balanced and equivalent? (Hint: at what interest rate per year NPW is equal to zero) b. If the interest rate is 5% per year compounded yearly, for what value of Q will the cash flow have equivalence? (Hint: for what value of Q, NPW is equal to zero)
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
Related questions
Question
Please do it in excel
Transcribed Image Text:The cash flow for a company for their investment account
is shown in the table below:
Cash
Year Cash Inflow
Outflow
$50,000
($2,000)
1
Q
($5,100)
2
3Q
($4,500)
$1,600
(36Q)
4
$0
$0
5
12Q
($8,500)
6
20Q
($4,500)
7
$7,500
($6,500)
8
$0
(16Q)
a. If the value of Q is $2,000 at what interest rate will the
net cash flow be balanced and equivalent? (Hint: at
what interest rate per year NPW is equal to zero)
b. If the interest rate is 5% per year compounded yearly,
for what value of Q will the cash flow have equivalence?
(Hint: for what value of Q, NPW is equal to zero)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 7 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education