A Firm Has the Following Investment Alternatives:​ Each Investment Costs $1,400 and the Firm's Cost of Capital

question 4

Essay

A firm has the following investment alternatives:​ $\begin{array}{cccc}&&\text { Cash Inflow }\\\text { Year } &A&B&C\\1 & \$ 400 & \$-- & \$-- \\2 & 400 & 400 & -- \\3 & 400 & 800 & -- \\4 & 400 & 800 & 1,800\end{array}$

Each investment costs $1,400 and the firm's cost of capital is 10 percent.
a. What is each investment's internal rate of return?
b. Should the firm make any of these investments?
c. What is each investment's net present value?
d. Should the firm make any of these investments?

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Definitions:

Majority Rule

A decision-making principle where the choice of the greater number of participants is accepted by all.

Reasonable Force

The amount of force necessary to protect oneself or property, which is legally justified under the circumstances.

Privileged Communications

A legal concept preventing certain discussions held in confidence (e.g., between lawyer and client) from being disclosed without the consent of the disclosing party.

Fifth Amendment

An amendment to the United States Constitution that provides for various legal protections, including the right against self-incrimination and double jeopardy.