There are three projects available to a company to invest in. All investments require an initial...

  

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There are three projects available to a company to invest in. All investments require an initial investment of $25 million with the following forecasted cash flows. Assume end of year cash flows except for date 0 (i.e. date 0 represents "today"). Year 0 1 2 3 Investment A -$25M +$25M $2.5M $2.5M +$2.5M $2.5M | $30M +$2.5M $27.5M $2.5M Investment B -$25M Investment C -$25M (i) Assuming the discount rate is 9%, which investment should the company choose? Show your calculations. (ii) Now if the discount rate can be higher or lower than 9% will you change your mind for the company to invest in? Why or why not? (iii) When will Investment A, B or C be preferred? There are three projects available to a company to invest in. All investments require an initial investment of $25 million with the following forecasted cash flows. Assume end of year cash flows except for date 0 (i.e. date 0 represents "today"). Year 0 1 2 3 Investment A -$25M +$25M $2.5M $2.5M +$2.5M $2.5M | $30M +$2.5M $27.5M $2.5M Investment B -$25M Investment C -$25M (i) Assuming the discount rate is 9%, which investment should the company choose? Show your calculations. (ii) Now if the discount rate can be higher or lower than 9% will you change your mind for the company to invest in? Why or why not? (iii) When will Investment A, B or C be preferred?