Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 103

If Alfred were to pay $12,500 in return for a cash flow of $25,000 after four years, his rate of return may be computed as:

Since the actual rate of return obtained by Alfred is greater than the required rate of return of 12%, the investment is attractive.

Not surprisingly, all three approaches lead to the same decision.