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Analysis of Capital Investments
Isabel Fuentes, Student (University), United States
Should a firm accept the independent projects described below? Why or why not?
A) the firmīs cost of capital is 10 % and the estimated internal rate of return of the project is 11 %.
B) a capital investment requires a $150,000 initial investment. The firmīs cost of capital is 10%, and the present value of the expected cash inflows from the project is $148,000.
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Analysis of Capital InvestmentsFrans Mandla Motau, Manager, South Africa The firm should accept the project that has the internal rate of return of 11% which is higher than the cost of capital.
The firm should not accept the project with the NPV that is less than the intial investment amount. |
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