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- Download: http://solutionzip.com/downloads/a-firm-has-two-1000/
- A firm has two $1,000, mutually exclusive investment alternatives with the following cash inflows. The cost of capital is 6 percent.
- Cash Inflow
- Year A B
- 1 $175 $1,100
- 2 $175 -
- 3 $175 -
- 4 $175 -
- 5 $175 -
- 6 $175 -
- 7 $175 -
- 8 $175 -
- a. What is the internal rate of return on each investment? Which investment should the firm make?
- b. What is the net present value of each investment? Which investment should the firm make?
- c. If the cash inflows can be reinvested at 8 percent, which investment should be made?
- Download: http://solutionzip.com/downloads/a-firm-has-two-1000/
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