A firm has three investment opportunities. Each costs $1,000, and the firm's cost of capital is 10 percent. The cash inflow of each investment is as follows: $\begin{array}{ccccc}
&&\text { Cash Inflow }\
\text { Year } &A&B&C\
1 & \$ 300 & 500 & 100 \
2 & 300 & 400 & 200 \
3 & 300 & 200 & 400 \
4 & 300 & 100 & 500
\end{array}$
a. If the net present value method is used, which investment(s) should the firm make?
b. What is the internal rate of retum of investment A ? The internal rate of return of investment B is 10.22% and 6.15% for investment C. Which investment s ) should the firm make?
c. What is the payback period for each investment?

Question

A firm has three investment opportunities. Each costs $1,000, and the firm's cost of capital is 10 percent. The cash inflow of each investment is as follows:​ $\begin{array}{ccccc}
&&\text { Cash Inflow }\
\text { Year } &A&B&C\
1 & \$ 300 & 500 & 100 \
2 & 300 & 400 & 200 \
3 & 300 & 200 & 400 \
4 & 300 & 100 & 500
\end{array}$
a. If the net present value method is used, which investment(s) should the firm make?
b. What is the internal rate of retum of investment A ? The internal rate of return of investment B is 10.22% and 6.15% for investment C. Which investment s ) should the firm make?
c. What is the payback period for each investment?

Quizplus · Accepted Answer

The Answer of A firm has three investment opportunities. Each costs $1,000, and the firm's cost of capital is 10 percent. The cash inflow of each investment is as follows:​ $\begin{array}{ccccc}
&&\text { Cash Inflow }\
\text { Year } &A&B&C\
1 & \$ 300 & 500 & 100 \
2 & 300 & 400 & 200 \
3 & 300 & 200 & 400 \
4 & 300 & 100 & 500
\end{array}$
a. If the net present value method is used, which investment(s) should the firm make?
b. What is the internal rate of retum of investment A ? The internal rate of return of investment B is 10.22% and 6.15% for investment C. Which investment s ) should the firm make?
c. What is the payback period for each investment?

A Firm Has Three Investment Opportunities A If the Net Present Value Method Is Used, Which