The firm cost of capital and risk free rate

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Reference no: EM131916462

A risky $500,000 investment is expected to generate the following cash flows:

Year 1 2 3

$250,000 $266,667 $285,715.

The probability of receiving each cash inflow is 80, 75, and 70 percent, respectively. If the firm's cost of capital is 10 percent, and the risk free rate is 6 percent should the investment be made?

-2,629.60

162,320.68

34,602.39

100,000.00

Reference no: EM131916462

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