Consider the following investment cash flows: Year Cash Flow 0 ($1,000) 1 250 2 400 3 500
Question:
Consider the following investment cash flows:
Year Cash Flow
0 ($1,000)
1 250
2 400
3 500
4 600
5 600
a. What is the return expected on this investment measured in dollar terms if the opportunity cost rate is 10 percent?
b. Provide an explanation, in economic terms, of your answer.
c. What is the return on this investment measured in percentage terms?
d. Should this investment be made? Explain your answer.
Opportunity CostOpportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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a Computation of the Net Present Value Years Cash Flows 0 1000 1 2...View the full answer
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