Suppose Your Firm Is Considering an Investment Project That Will

question 107

Multiple Choice

Suppose your firm is considering an investment project that will generate an expected return of 15%.The project costs $200,000.Suppose further that your firm has $200,000 of retained earnings.If the market interest rate is 10%, your firm should

• A)loan the retained earnings out at 5%.
• B)loan the retained earnings out at 10%.
• C)loan the retained earnings out at 15%.
• D)invest the $100,000 of retained earnings in the project and borrow the remaining $100,000 at the interest rate of 10%.

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