Expected Rate of Return: NPV of cash flow stream
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An investment is expected to pay the following annual cash flows:
0
1: $600
2: $600
3: $800
4: $1200
5: $1500
If the investor thinks the apppropriate interest rate of this investment is 9.3%, what is the net present value of the above cash flow stream?
Suppose your are informed that the price of this investment is actually worth $3,000, what is the expected rate of return on this investment:
Options are:
A. 14.20%
b. 11.44%
c. 14.80%
d. 10.43%
e. 10.93%
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Solution Summary
The solution examines the expected rate of return on the NPV of cash flow streams.
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