Problem $22-18$

A risky $$390,000$ investment is expected to generate the following cash flows:

Year $1234$

$ $103,100$ $ $174,685$ $ $162,860$ $ $143,800$

If the firm$$s cost of capital is $12$ 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

should

be made.

An alternative use for the $$390,000$ is a four$-$year U$.$S$.$ Treasury bond that pays $$27,300$ annually and repays the $$390,000$ at maturity. Management believes that the cash inflows from the risky investment are equivalent to only $85$ percent of the certain investment, which pays $7$ 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

should

be made.