A firm has the following investment alternatives: Cash Inflows A B C Year 1 $ 1,100 $3,600 ____ Year 2 1,100 ______ _____ Year 3 1,100 ______ $4,562 Each investment costs $3,000; investments B and C are mutually exclusive, and the firms cost of capital is 8%. e. According to both the net present values and internal rates of return, which investments should the firm make? f. If the firm could reinvest the $3,600 earned in 1 year from investment B at 10%, what effect would that information has on your answer to part e? Would the answer be different if the rate were 14%? g. If the firms cost View complete question » A firm has the following investment alternatives: Cash Inflows A B C Year 1 $ 1,100 $3,600 ____ Year 2 1,100 ______ _____ Year 3 1,100 ______ $4,562 Each investment costs $3,000; investments B and C are mutually exclusive, and the firms cost of capital is 8%. e. According to both the net present values and internal rates of return, which investments should the firm make? f. If the firm could reinvest the $3,600 earned in 1 year from investment B at 10%, what effect would that information has on your answer to part e? Would the answer be different if the rate were 14%? g. If the firms cost of capital had been 10%, what would be investment A’s internal rate of return? h. The payback method of capital budgeting selects which investment? Why?

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