Investment Opportunities Assignment | Homework For You
February 13th, 2020
A firm with an initial endowment of $500,00 has the following investment opportunities:
| Project | I1 | X2 | IRR |
| A | $100,000 | $105,000 | 5% |
| B | $100,000 | $115,000 | 15 |
| C | $100,000 | $130,000 | 30% |
Given the information above and that the firm has a required rate of return of 10% and seeks to maximize firm value, the firm’s investment in period 1 (I1) and dividends in period 1 (D1) and period 2 (D2) will be:
| I1 = $0; D1 = $500,000; D2 = $0 | ||
| I1 = $100,000; D1 = $400,000; D2 = $130,000 | ||
| I1 = $200,000; D1 = $300,000; D2 = $235,000 | ||
| I1 = $200,000; D1 = $300,000; D2 = $245,000 | ||
| I1 = $300,000; D1 = $200,000; D2 = $350,000 |
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