Hi there!Attached is the completed solution for each and every problem. All steps are shown, all calculations are displayed, and every answer is fully and completely explained. Thanks again,Selenica

0,04 Expected Returns
End of Year
A
0
-1050
1
50
2
50
3
50
4
50
5
50
6
50
7
50
8
50
9
50
10
1.050
NPV
$31,11
IRR
4%
End of Year
0
1
2
3
4
5
6
7
8
9
10
Rate
NPV
IRR

A
-1050
50
50
50
50
50
50
50
50
50
1.050
0,08
($251,30)
4%

Present Value

NPV
IRR

Rate
NPV
IRR

B
-1.050
0
150
150
150
200
250
200
150
100
50
$77,84
5%
B
-1.050
0
150
150
150
200
250
200
150
100
50
0,08
($127,49)
5%

a. Assuming that investments A an
The net present value of Investmen
Most importantly, the difference be

b. Recognizing that investment B i

4% risk premium to the 4% discount ra
investment B. Compare your findings re

Neither investment is acceptable with a
but both investment options are negat

c. From your findings in questions

whether that for investment B is above

The IRR for plan A is exactly equal to 4%
However, when we consider "risk", Pro
discount rate, when we consider risk, P

d. Use the present value technique
with your response to question c.

The IRR on Project A is 4% and 5% for P
and for Project B is less than 8%.

In this case, because the IRR for Investm

e. From the information given, whi

It really depends upon the discount rat
If we consider a discount rate of 4%, Pr
is less than the NPV for B. Furthermore

If Dave truly believes that B is riskier, h

f. Indicate to Dave how much mo

FV
PV

$67,20
50
$17,20

The $50 savings account will have grow

ming that investments A and B are equally risky and using the 4% discount rate, apply the present value technique to assess the ac
present value of Investment A is $31.11, lower than the $77.84 NPV for Investment B. The Internal Rate of Return (IRR) is 4% f
portantly, the difference between the NPV for A and B is greater than 100%, indicating that Investment B provides more than a m

nizing that investment B is more risky than investment A, reassess the two alternatives, adding the

your findings in questions a and b, indicate whether the IRR for investment A is above or below 4% and

plan A is exactly equal to 4% and for B, 5%. If the discount rate is 4%, then Project B SEEMS to be the superior choiec.
when we consider "risk", Project A is the superior choice. Although the IRR is only equal to the cost of capital, or

he present value technique to estimate the IRR on each investment. Compare your findings and contrast them

Project A is 4% and 5% for Project B. As stated in question c, Investment A is equal to 4% (it does not exceed)

the information given, which, if either, of the two investments would you recommend that Dave make? Explain your answer.

pends upon the discount rate. It is not clear to me why Dave believes Investment B is riskier than Investment A.
der a discount rate of 4%, Project B is by far the superior choice. Project A's IRR does not exceed 4%, and the NPV for A

ate to Dave how much money the extra $50 will have grown to by the end of 2026, assuming he makes no withdrawals from the

value technique to assess the acceptability of each investment and...