1a.

An investment promises to pay $10,000, $14,000, $16,000 and $20,000 at the end of the first, second, fourth and fifth year respectively.A cash injection of $8,000 is required at the end of the third year.The investment may be purchased for $50,000, which would have to be borrowed at an interest rate of 8%.Should this investment be undertaken? (5 marks)

1b.

Should the investment in question 1 be undertaken if the cash injection at the end of the second year is $6,000 (no cash injection in third year) and the $50,000 can only be borrowed at 10%? (5 marks)