A firm has two \$1,000, mutually exclusive investment alternative

Question # 00004023 Posted By: expert-mustang Updated on: 11/24/2013 09:33 AM Due on: 11/24/2013
Subject Accounting Topic Accounting Tutorials:
Question
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?
Tutorials for this Question
1. Solution: A firm has two \$1,000, mutually exclusive investment alternative

Tutorial # 00003796 Posted By: expert-mustang Posted on: 11/24/2013 09:37 AM
Puchased By: 2
Tutorial Preview
x PVIFA 6%, 8 years] – CO = [\$175 x 6.20979] – 1,000 = \$86.71325 ...
Attachments
Solution-00003796.zip (81 KB)

Great! We have found the solution of this question!