A firms cost of capital is 12 percent. The firm has three investments to choose among; the cash flows of each are as follows: Each investment requires a $1,000 cash outlay, and investments B and C are mutually exclusive. a. Which investment(s) should the firm make according to the net present value s? Why? b. Which investment(s) should the firm

A firm€™s is 12 percent. The firm has three investments to choose among; the cash flows of each are as follows:

Each investment requires a $1,000 cash outlay, and investments B and C are mutually exclusive.
a. Which investment(s) should the firm make according to the net present values? Why?
b. Which investment(s) should the firm make according to the internal rates of return? Why?
c. If all funds are reinvested at 15 percent, which investment(s) should the firm make? Would your answer be different if the reinvestment rate were 12 percent?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...