Problem 22-04 Afirm has the following investment alternatives: Cash Inflows Year A C 1 $1,260 $3,762 2 1,260 3 1,260 54,635 Each investment costs $3,300; Investments Band Care mutually exclusive, and the firm's cost of capital is 9 percent. Use Appendix A. Appendix 3 and Appendix to answer the questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. a. What is the net present value of each investment? Use a minus sign to enter a negative values, if any, Round your answers to the nearest dollar A: $ B: $ GES b. According to the net present values, which investment(s) should the firm make The firm should make investments) B c. What is the internal rate of return on each investment? Round your answers to the nearest whole number. A: B C: 16 d. According to the intemal rates of return, which investments) should the firm make The firm should make investment(s) e. According to both the net present values and internal rates of return, which investments should the firm make? The net present value and internal rate of return lead to so the firm should If the firm could reinvent the $3,762 earned in year 1 from investment 8 at 10 percent, which investment() should the firm make? Round your answer to the nearest dollar Terminal value of investment B: $ The firm should make investment(s) Would the answer be different the rate were 12 percent Round your answer to the nearest dollar Terminal value of investments The firm should make investment(s) b. According to the net present values, which Investment(s) should the form make? The firm should make Investment(s)-Select: B. c. What is the internal rate of return on each investment? Round your answers to the nearest whole number A: B: % C: % d. According to the Internal rates of return, which investment(s) should the fimm make? The firm should make Investment(s)-S B e. According to both the net present values and internal rates of return, which investments should the firm make? The net present value and internal rate of return lead to see B so the firm should let f. If the firm could reinvest the $3,762 earned in year 1 from investment B at 10 percent, which investment(s) should the firm make? Round your answer to the nearest dollar. Terminal value of investment B: $ The firm should make Investment(s) Select B Would the answer be different if the rate were 12 percent Round your answer to the nearest dollar. Terminal value of investment B: The firm should make investment(s) - B 9. If the firm's cost of capital had been 10 percent, what would be investment A's internal rate of retur? Round your answer to the nearest whole number 96 h. The payback method of capital budgeting selects which investment? The payback method of capital budgeting selects investment B
