Question details

Cablevision, Inc., will invest $48,000 in a project. The firm’s discount rate (cost of capital)
$ 7.00

Cablevision, Inc., will invest $48,000 in a project. The firm’s discount rate (cost of capital) is 9 percent. The investment will provide the following inflows.

1................

$10,000

2................

10,000

3................

16,000

4................

19,000

5................

20,000

The internal rate of return is 15 percent.

         a.      If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.)

         b.      If the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years?

         c.      Generally is one investment assumption likely to be better than another?

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