Initial Investment $14,000 End of Year Income 1 $6,000 2 $3,000 3 $5,000 4 $2,000 5 $2,100

Elliott Dumack must earn a minimum rate of return of 11% to be adequately compensated for the risk of the following investment:

a. Use present-value techniques to estimate the yield on this investment.

b. On the basis of your finding in part a , should Elliott make the proposed investment?

a. The yield on this investment is %. (Round to two decimal places.)

b. On the basis of your finding in part a , should Elliott make the proposed investment? (Select the best answer below.)

A. This investment shouldshould be recommended because it yields moremore than the minimum required return.

B. This investment should not be recommended because 11 % does not compensate for an investment that lasts longer than one year.

C. This investment should be recommended because 11 % is an arbitrary choice of return for an investment of this risk level.

D. This investment should notshould not be recommended because it yields lessless than the minimum required return.