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In: Finance

1. You are thinking about investing $4,615 in your​ friend's landscaping business. Even though you know...

1. You are thinking about investing $4,615 in your​ friend's landscaping business. Even though you know the investment is risky and you​ can't be​ sure, you expect your investment to be worth $5,640 next year. You notice that the rate for​ one-year Treasury bills is 1%. ​However, you feel that other investments of equal risk to your​ friend's landscape business offer an expected return of 9% for the year. What should you​ do? The present value of the return is ​$5174.31 ​(Round to the nearest​ cent.)

You should A. invest in the business/B. not invest in the business. ​(Select from the​ drop-down menu.)

2.

You have invested in a business that proudly reports that it is profitable. Your investment of $4,700 has produced a profit of $293. The managers think that if you leave your $4,700 invested with​ them, they should be able to generate $293 per year inprofits for you in perpetuity. Evaluating other investment​ opportunities, you note that other​ long-term investments of similar risk offer an expected return of 8%. Should you remain invested in this​ firm? The expected return of your investment is 6.2​%. ​(Round to one decimal​ place.)

​(Select from the​ drop-down menus.)

If projects that are similar in horizon and risk are offering an expected return of 8%​, then this business▼A. is not /B. is earning your opportunity cost of​ capital, and you should

▼A. invest elsewhere/B. remain invested

.

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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