Question: Tech Corp is looking to expand their operations and has a series of investment choices to consider. The following information is provided: Project 1: Cost
Tech Corp is looking to expand their operations and has a series of investment choices to consider. The following information is provided:
Project 1: Cost of capital 12%, initial investment made on 7/1/2022 of $1.5M. Profit changes for year end '22, '23, '24, and '25 are $250K, $400K, $575K, and $750K Project 2: Cost of capital 10%, initial investment made on 7/1/2022 of $800K. Profit changes for year end '22, '23, '24, and '25 are $250K, $300K, $175K, and $100K Project 3: Cost of capital 14%, initial investment made on 7/1/2022 of $1.2M. Profit changes for year end '22, '23, '24, and '25 are $415K per year
Assuming the company was able to invest in all profitable ventures, which project(s) if any would they choose to move forward with. If there are multiple investments that are profitable, in what order would you suggest they invest?
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