2. A firm is considering three possible one-year investments, which we will name X, Y, and Z.

• Investment X would cost $10 million now and would return

$11 million next year, for a net gain of $1 million.

• Investment Y would cost $100 million now and would return $105 million next year, for a net gain of $5 million.

• Investment Z would cost $1 million now and would return

$1.2 million next year, for a net gain of $200,000.

The firm currently has $150 million of cash on hand that it can loan out at 15 percent interest. Which of the three possible investments should it undertake? LO15.3

a. X only.

b. Y only.

c. Z only.

d. X and Y.

e. X and Z.

f. X, Y, and Z.