An investment costs P465 now and is expected to produce cash flows of P100 at the end of each of the next 4 years, plus an extra lump-sum payment of P200 at the end of the fourth year. What is the expected rate of return on this investment?

An investment costs P465 now and is expected to produce cash flows of P100 at the end of each of the next 4 years, plus an extra lump-sum payment of P200 at the end of the fourth year. What is the expected rate of return on this investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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