Should you remain invested in this firm

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Reference no: EM132068641

You have invested in a business that proudly reports that it is profitable. Your investment of $ 4,600 has produced a profit of $ 291. The managers think that if you leave your $ 4,600 invested with them, they should be able to generate $ 291 per year in profits for you in perpetuity. Evaluating other investment opportunities, you note that other long-term investments of similar risk offer an expected return of 8.4 %. Should you remain invested in this firm?

1. The expected return of your investment is nothing ____%

2. If projects that are similar in horizon and risk are offering an expected return of 8.4 %, then this business is not is earning your opportunity cost of capital and you should remain invested invest elsewhere.

Reference no: EM132068641

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