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What is the net present value of investment a

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A firm has the following investment alternatives. Each one lasts a year Investment A B CCash inflow $3,150 $790 $800Cash outflow$2,000 $700 $600

The firm's cost of capital is 7 percent. A and B are mutually exclusive and B and C are mutually exclusive.

a. What is the net present value of investment A? B? and C?

b. What is the internal rate on investment A? B? and C?

c. Using both the results of the NPV and the IRR which investment(s) should the firm select? Why?

d. If the firm's cost of capital rose to 10 percent, what effect would that have on investment A's internal rate of return?

Reference no: EM132900470

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