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Investment A is considered to be typical of the firm s investments. Investment B s cash flows vary over time but are considered to be

Investment A is considered to be typical of the firms investments. Investment Bs cash flows vary over time but are considered to be less certain. Investment Cs cash flows diminish over time but because most of the cash flows occur early in the investments life, they are considered to be more certain. The firms cost of capital is 10 percent, but the financial manager uses a hurdle rate of 6 percent for less-risky projects and 14 percent for riskier projects. Use Appendix B and Appendix D to answer the questions. Assume that the investments are not mutually exclusive and there are no budget restrictions.

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