A risky $375,000 investment is expected to generate the following cash flows: Year $141,400 $167,100 $152,414 $133,100 a. If the firm's cost of capital is 10 percent, should the investment be made? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment should be made. b. An alternative use for the $375,000 is a four-year U.S. Treasury bond that pays $22,500 annually and repays the $375,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 75 percent the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment should not be made.
A risky $375,000 investment is expected to generate the following cash flows: Year $141,400 $167,100 $152,414 $133,100 a. If the firm's cost of capital is 10 percent, should the investment be made? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment should be made. b. An alternative use for the $375,000 is a four-year U.S. Treasury bond that pays $22,500 annually and repays the $375,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 75 percent the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The investment should not be made.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Am. 121.
![A risky $375,000 investment is expected to generate the following cash flows:
Year
$141,400
$167,100
$152,414
$133,100
a. If the firm's cost of capital is 10 percent, should the investment be made? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar.
NPV: $
The investment should be made.
b. An alternative use for the $375,000 is a four-year U.S. Treasury bond that pays $22,500 annually and repays the $375,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 75 percent of
the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. Use a minus sign to enter a negative value, if any. Round your answer to
the nearest dollar.
NPV: $
The investment should not be made.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1477abaf-5539-4647-97a1-588ffdb5debc%2Fcf8cf3e7-2b64-46e1-a730-905b09b1068c%2Fvx1k3si_processed.png&w=3840&q=75)
Transcribed Image Text:A risky $375,000 investment is expected to generate the following cash flows:
Year
$141,400
$167,100
$152,414
$133,100
a. If the firm's cost of capital is 10 percent, should the investment be made? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar.
NPV: $
The investment should be made.
b. An alternative use for the $375,000 is a four-year U.S. Treasury bond that pays $22,500 annually and repays the $375,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 75 percent of
the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. Use a minus sign to enter a negative value, if any. Round your answer to
the nearest dollar.
NPV: $
The investment should not be made.
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