FIN 402 Week 2 Assignment Case Problem 4.1 , 4.2 , 2.1 , 5.2 , 13.1 ( Part a , b , c , d )
a . Assuming that investments A and B are equally risky and using the 4 % discount rate , apply the present value technique to assess the acceptability of each investment and to determine the preferred investment . Explain your findings . b . Recognizing that investment B is more risky than investment A , reassess the two alternatives , adding the 4 % risk premium to the 4 % discount rate for investment A and therefore applying a 8 % discount rate to investment B . Compare your findings relative to acceptability and preference to those found for question a . c . From your findings in questions a and b , indicate whether the IRR for investment A is above or below 4 % and whether that for investment B is above or below 8 %. Explain . d . Use the present value technique to estimate the IRR on each investment . Compare your findings and contrast them with your response to question c . e . From the information given , which , if either , of the two investments would you recommend that Dave make ? Explain your answer . f . Indicate to Dave how much money the extra $ 50 will have grown to by the end of 2026 , assuming he makes no withdrawals from the savings account .
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FIN 402 Week 2 Assignment Case Problem 4.1 , 4.2 , 2.1 , 5.2 , 13.1 ( Part a , b , c , d )
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FIN 402 Week 2 Assignment Case Problem 4.1 Coates ’ s Decision