A firm has the following investment  Cash inflows Year                A                       B                                          C 1                   $1,100                $3,600                                     - 2                   1,100                      -                                            - 3                   1,100                       -                                     $4,562 Each investment costs$3,000; investment B and C mutually exclusive, and the firm's cost of capital is 8 percent. f. .If the firm could reinvest the $3,600 earned in year 1 from invest- ment B at 10 percent, what effect would that information have on your answer to part e? Would the answer be different if the rate were 14 percent? g. If the firm’s cost of capital had been 10 percent, what would be invest- ment A’s internal rate of return? h. The payback method of capital budgeting selects which investment? Why?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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A firm has the following investment 

Cash inflows

Year                A                       B                                          C

1                   $1,100                $3,600                                     -

2                   1,100                      -                                            -

3                   1,100                       -                                     $4,562

Each investment costs$3,000; investment B and C mutually exclusive, and the firm's cost of capital is 8 percent.

f. .If the firm could reinvest the $3,600 earned in year 1 from invest- ment B at 10 percent, what effect would that information have on your answer to part e? Would the answer be different if the rate were 14 percent?

g. If the firm’s cost of capital had been 10 percent, what would be invest- ment A’s internal rate of return?

h. The payback method of capital budgeting selects which investment? Why?

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