Consider the following investment cash flows:

Year Cash Flow

$0-$$$1,100$

$1$ $$275$

$2$ $$325$

$3$ $$425$

$4$ $$575$

$5$ $$650$

a$.$ What is the return expected on this investment measured in dollar terms if the opportunity cost rate is $10\%$

b$.$ Provide an explanation, in economic terms, of your answer.

c$.$ What is the return on this investment measured in percentage terms?

d$.$ Should this investment be made? Why?

Answer rating: 100% (QA)

a To calculate the return expected on this investment in dollar terms we need to discount each cash ... View the full answer