NPV and rate of return
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Calculate the NPV and rate of return for each of the following investments. The opportunity cost of capital is 20 percent for all four investments.
Investment C0 C1
1 -10000 18000
2 -5000 9000
3 -5000 5700
4 -2000 4000
a) Which investment is most valuable
b) Suppose each investment would require use of the same parcel of land. Therefore you can take only one. Which one? Hint: What is the firm's objective: to earn a high rate of return or to increase firm value?
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