Rainy Day, Inc. is considering four possible development projects, each requiring an initial investment of $8,000,000. The

Question:

Rainy Day, Inc. is considering four possible development projects, each requiring an initial investment of $8,000,000. The cash inflows from each of the projects follow:

year project sun project cloudy project stormy project gloomy sun 3,000,000 8,500,000 1 4,000,000 2,500,000 3,000,000 2

(a) Compute the net present value of each of the projects. Rainy Day's cost of capital is 12 percent. Please show work.
(b) Rainy Day can take on only one project; which should it choose? Be certain to explain your reasoning for the project selected.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...