You have an investment opportunity available to you that requires $400,000. You have no funds available but you will have income of $120,000 this year. The investment will have a net payoff $33,000 at the end of the year. If the market rate is 7.5% will you make the investment?
A) No, because I need $280,000 more than I will have.
B) Yes, because I will $3,000 above my required return.
C) No, because I only get $33,000 back on my $400,000.
D) Yes, because the market rate is less than the borrowing rate.
Correct Answer:
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