A firm has the following investment alternatives. Each one lasts a year.
| Investment | A | | B | | C | |
| Cash inflow | $ | 1,008 | | | 330 | | | 348 | |
| Cash outflow | $ | 900 | | | 300 | | | 300 | |
The firms cost of capital is 8 percent. A and B are mutually exclusive, and B and C are mutually exclusive.
- What is the net present value of investment A? Investment B? Investment C? Use Appendix B to answer the questions. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent.
A: $
B: $
C: $
- What is the internal rate on investment A? Investment B? Investment C? Round your answers to the nearest whole number.
A: %
B: %
C: %
- If the firms cost of capital rose to 14 percent, what effect would that have on investment As internal rate of return? Round your answer to the nearest whole number.
If the cost of capital rises to 14 percent, the internal rate of return of investment A will remain _______%.
Interest Factors for the Present Value of One Dollar Time Period (e.g.. year) 5% 6% 7% 9% 2% 4% 8% 10% 12% 14% 15% 24% 1% 3% 16% 18% 20% 28% 962 893 870 1 990 980 971 952 943 935 926 917 909 877 862 847 833 806 781 .980 .971 826 751 683 797 610 2 961 943 925 907 890 840 873 857 842 769 756 658 743 718 694 650 524 942 924 794 735 772 3 915 889 864 816 712 .675 .641 609 579 477 855 822 763 572 497 552 476 423 4 961 889 823 792 708 650 636 .592 519 .516 482 .373 713 5 951 906 863 784 747 681 621 .567 437 402 341 291 596 547 502 460 335 227 6 942 888 838 790 746 705 666 .630 564 507 456 432 410 370 275 711 400 7 933 .871 813 760 665 623 583 540 500 .513 452 .376 354 314 279 222 178 139 108 467 404 8 923 853 789 731 .677 627 .582 351 327 .305 266 233 .179 544 284 194 9 914 837 766 703 .645 592 424 361 308 263 226 .144 227 19 744 10 905 820 676 614 .558508 463 422 386 322 270 247 162 116 .085 475 350 135 094 11 896 804 722 650 .585 .527 429 388 287 237 215 195 162 066 788 356 .326 .257 168 12 887 701 .625 557 497 444 397 .319 208 .187 137 112 076 052 469 442 13 879 773 758 681 .601 530 415 368 290 229 182 163 145 116 093 061 040 141 123 577 555 078 065 032 025 14 .870 661 505 388 340 299 275 263 .205 160 140 125 .099 049 642 239 15 861 743 481 417 .362 315 183 108 084 040 458 436 394 292 .252 071 054 019 015 16 853 728 623 534 339 317 218 163 123 107 093 032 231 026 17 844 714 605 513 .371 270 198 146 .108 093 080 060 045 095 .08 038 .021012 350 331 18 836 828 820 700 587 494 416 296 250 212 180 130 069 .051 396 194 19 686 570 475 .276 258 .232 .164 116 083 070 .060 043 037 .051 031 017 .009 104 026 673 20 554 456 377 .312 215 178 .149 073 061 014 007 375 295 024 25 780 610 478 233 .184 146 116 092 059 038 030 .016 010 005 002 308 099 075 057 004 30 742 .552 412 231 174 131 033 020 015 012 .007 002 001 Interest Factors for the Present Value of One Dollar Time Period (e.g.. year) 5% 6% 7% 9% 2% 4% 8% 10% 12% 14% 15% 24% 1% 3% 16% 18% 20% 28% 962 893 870 1 990 980 971 952 943 935 926 917 909 877 862 847 833 806 781 .980 .971 826 751 683 797 610 2 961 943 925 907 890 840 873 857 842 769 756 658 743 718 694 650 524 942 924 794 735 772 3 915 889 864 816 712 .675 .641 609 579 477 855 822 763 572 497 552 476 423 4 961 889 823 792 708 650 636 .592 519 .516 482 .373 713 5 951 906 863 784 747 681 621 .567 437 402 341 291 596 547 502 460 335 227 6 942 888 838 790 746 705 666 .630 564 507 456 432 410 370 275 711 400 7 933 .871 813 760 665 623 583 540 500 .513 452 .376 354 314 279 222 178 139 108 467 404 8 923 853 789 731 .677 627 .582 351 327 .305 266 233 .179 544 284 194 9 914 837 766 703 .645 592 424 361 308 263 226 .144 227 19 744 10 905 820 676 614 .558508 463 422 386 322 270 247 162 116 .085 475 350 135 094 11 896 804 722 650 .585 .527 429 388 287 237 215 195 162 066 788 356 .326 .257 168 12 887 701 .625 557 497 444 397 .319 208 .187 137 112 076 052 469 442 13 879 773 758 681 .601 530 415 368 290 229 182 163 145 116 093 061 040 141 123 577 555 078 065 032 025 14 .870 661 505 388 340 299 275 263 .205 160 140 125 .099 049 642 239 15 861 743 481 417 .362 315 183 108 084 040 458 436 394 292 .252 071 054 019 015 16 853 728 623 534 339 317 218 163 123 107 093 032 231 026 17 844 714 605 513 .371 270 198 146 .108 093 080 060 045 095 .08 038 .021012 350 331 18 836 828 820 700 587 494 416 296 250 212 180 130 069 .051 396 194 19 686 570 475 .276 258 .232 .164 116 083 070 .060 043 037 .051 031 017 .009 104 026 673 20 554 456 377 .312 215 178 .149 073 061 014 007 375 295 024 25 780 610 478 233 .184 146 116 092 059 038 030 .016 010 005 002 308 099 075 057 004 30 742 .552 412 231 174 131 033 020 015 012 .007 002 001
