Question
Investments A and B are mutually exclusive and cost $1,000 each . The firm's cost of capital is 10%, and the investments' estimated cash inflows
Investments A and B are mutually exclusive and cost $1,000 each. The firm's cost of capital is 10%, and the investments' estimated cash inflows are:
| YEAR | CASE A | CASE B |
|---|---|---|
| 1 | $1,200 | 0 |
| 2 | 0 | 0 |
| 3 | 0 | $1,500 |
What investment(s) should the firm make according to net present value (NPV)? SHOW YOUR CALCULATIONS FOR EACH CASE (or inputs if you use a financial calculator or spreadsheet) and MAKE SURE YOU STATE WHICH INVESTMENT (A or B) IS YOUR CHOICE. CARRY YOUR ANSWERS TO THE PENNY (ie. $12.34)
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DeFi And The Future Of Finance
Authors: Campbell R. Harvey, Ashwin Ramachandran, Joey Santoro, Vitalik Buterin, Fred Ehrsam
1st Edition
