Question

(Disregard income taxes in this problem.) Compute the following:a.An investment of $10,000 has an investment/inflow ratio of 6.2 and a useful life of12 years. What are the annual cash inflow and internal rate of return?b.The internal rate of return for an investment expected to yield an annual cash inflowof $2,000 is 14 percent. How much is the investment if the investment/inflow ratiois 6.14?c.What is the maximum investment a company would make in an asset expected toproduce annual cash inflow of $5,000 a year for seven years if its required rate ofreturn is 16 percent?d.How much investment per dollar of expected annual operating savings can a com-pany afford if the investment has an expected life of eight years and its required rateof return is 14 percent?

Answer 1

Step-by-step explanation:

a) Investment/flow ratio =10000/annual cash flow=6.2

So, the annual cash flow is 10000/6.2=1613

b) Investment/flow ratio =investment/2000=6.14

So, the investment is 2000*6.14=12280