Question
1.Attempt the following: a.Firm 1 has 10,000 to invest. Firm 2 offers Firm 1 the following proposal: invest 10,000 now and get 11,000 back in
1.Attempt the following:
a.Firm 1 has 10,000 to invest. Firm 2 offers Firm 1 the following proposal: invest 10,000 now and get 11,000 back in 12 months. The returns on this investment are guaranteed, and there are no other costs involved? What should Firm 1 do?
b.Firm 1 is considering investing their profit into any of the following two projects. Investment appraisal techniques have been used, and the following results found:
Project A
Project B
Internal Rate of Return
6%
8%
Net present value
88000
61000
Through an examination of each of the investment appraisal techniques above, which project should Firm 1 select?
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