A risky $400,000 investment is expected to generate
January 2nd, 2018
A risky $400,000 investment is expected to generate the following cash flows:Year 1 2 3 4$145,300 $175,445 $156,788 $145,000A) If the firm’s cost of capital is 10 percent, should the investment be made?B) An alternative use for the $400,000 is a four-year U.S. Treasury bond that pays $28,000 annually and repays the $400,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 75 percent of the certain investment, which pays 7 percent. Does this information alter the decision in a?