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: $ 27755 The investment should be made. b. An alternative use for the $465,000 is a four-year U.S. Treasury bond that pays $37,200 annually and repays the $465,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 80 percent of the certain investment, which pays 8 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: $ -29481 The investment should not be made.
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: $ 27755 The investment should be made. b. An alternative use for the $465,000 is a four-year U.S. Treasury bond that pays $37,200 annually and repays the $465,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 80 percent of the certain investment, which pays 8 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: $ -29481 The investment should not be made.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 22-18
A risky $465,000 investment is expected to generate the following cash flows:
4
$168,024
$135,000
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: $
27755
The investment should not o
Year
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The investment should
be made.
b. An alternative use for the $465,000 is a four-year U.S. Treasury bond that pays $37,200 annually and repays the $465,000 at maturity.
Management believes that the cash inflows from the risky Investment are equivalent to only 80 percent of the certain investment, which pays 8
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: $
-29481
Partially Correct
1
$144,200
2
$173,470
be made.
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