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A risky $375,000 investment is expected to generate the following cash flows: Year 1 $117,500 2 $167,045 3 $163,166 4 $143,200 a. If the
A risky $375,000 investment is expected to generate the following cash flows: Year 1 $117,500 2 $167,045 3 $163,166 4 $143,200 a. If the firm's cost of capital is 14 percent, should the investment be made? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment -Select- O be made. b. An alternative use for the $375,000 is a four-year U.S. Treasury bond that pays $22,500 annually and repays the $375,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 80 percent of the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment -Select- be made.
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