Question
eBook Problem 22-05 A firms cost of capital is 9 percent. The firm has three investments to choose among; the cash flows of each are
eBook Problem 22-05 A firms cost of capital is 9 percent. The firm has three investments to choose among; the cash flows of each are as follows: Cash Inflows Year A B C 1 $ 412 $ 1,276 2 412 3 412 4 $ 1,858 Each investment requires a $1,100 cash outlay, and investments B and C are mutually exclusive. Use Appendix A, Appendix B and Appendix D to answer the questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. Which investment(s) should the firm make according to the net present values? Use a minus sign to enter negative values, if any. Round your answers to the nearest dollar. A: $ B: $ C: $ The firm should make investment(s) -Select- . Which investment(s) should the firm make according to the internal rates of return? Round your answers to the nearest whole number. A: % B: % C: % The firm should make investment(s) -Select- . If all funds from investment C are reinvested at 14 percent, which investment(s) should the firm make? Round your answer to the nearest dollar. Terminal value of investment C: $ The firm should make investment(s) -Select- . Would your answer be different if the reinvestment rate were 9 percent? Round your answer to the nearest dollar. Terminal value of investment C: $ The firm should make investment(s) -Select- .
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started