A firm has has the following investment alternatives. each costs. $10,000 and has the following cash flows.

Cash flow. Year. 1. 2. 3. 4.

investment A. $4,000 $4000 $4000. 4,000

Investment B. $3,600. $3,800 4,200. 4,600

Investment A is considred to be typical of the firms investments, but investments Bs cash flow are less certain. The firms cost of capital is 8 percent, but the financial manager uses required rate of 6 percent for less risky projects and 10% for riskier projects.

3a. based on cost of capital, which investment should be made?

3b,. if the financial manager uses the risk-adjusted cost of capital which investments should be made

3c. what other info would you take into consideration when chosing which