ROVNO Ltd Just Invested $50 000 into a New Local Network

question 37

Essay

ROVNO Ltd. just invested $50 000 into a new local network. Services provided by the network will bring $15 000 per year in the next five years. The following information is given:
- real MARR = 10%
- expected annual inflation = 2%
- the network will be sold for salvage after five years; its depreciation rate is 20%
Is this a good investment in terms of the internal rate of return?

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Definitions:

Canadian Bill

A short-term government security issued by the Canadian government, similar to treasury bills in the United States.

Stock Index

A statistical measure that tracks the performance of a specific basket of stocks, representing a particular market or a segment of it.

Correlations

A statistical measure that indicates the extent to which two or more variables fluctuate in relation to each other.

ADRs

American Depository Receipts (ADRs) are a type of negotiable security that represents shares in a foreign company and is traded on a local stock exchange but represents a specified number of shares in a foreign corporation.