A firm has the following investment alternatives. Each one lasts a year Investment A B C Cash
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Question:
A firm has the following investment alternatives. Each one lasts a year
| Investment | A | B | C |
| Cash inflow | $3,150 | $790 | $800 |
| Cash outflow | $2,000 | $700 | $600 |
The firm's cost of capital is 7 percent. A and B are mutually exclusive and B and C are mutually exclusive. a. What is the net present value of investment A? B? and C? b. What is the internal rate on investment A? B? and C? c. Using both the results of the NPV and the IRR which investment(s) should the firm select? Why? d. If the firms cost of capital rose to 10 percent, what effect would that have on investment As internal rate of return?
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