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Unique investment opportunity

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1. You have an opportunity to invest $105 000 now in return for $79 900 in one year and $29 600 in two years. If your cost of capital is 9.4%?, what is the NPV of this? investment?

2. You have been offered a unique investment opportunity. If you invest $8 800 today, you will receive $440 one year from? now, $1 320 two years from? now, and $8 800 ten years from now.

a. What is the NPV of the opportunity if the cost of capital is 5.4% per? year? Should you take the? opportunity?

b. What is the NPV of the opportunity if the cost of capital is 1.4% per? year? Should you take it? now?

3. Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $4.97 million per year. Your? up-front setup costs to be ready to produce the part would be $7.81 million. Your discount rate for this contract is 8.4%.

a. What does the NPV rule say you should? do?

b. If you take the? contract, what will be the change in the value of your? firm?

Reference no: EM133227665

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