The cost of capital for a firm is 10 percent. The firm has two possible
investments with the following cash inflows:
Year 1 $300 $200
2 200 200
3 100 200
a. Each investment costs $480. What investment(s) should the firm make
according to net present value?
b. What is the internal rate of return for the two investments? Which
investment(s) should the firm make? Is this the same answer you obtained
in part a?
c. If the cost of capital rises to 14 percent which investment(s) should the
Answer ABC Please
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