A firm is considering three possible one-year investments, which we will name X, Y, and Z. ∙ Investment X would cost $10 million now and would return $11 million next year, for a net gain of $1 million. ∙ Investment Y would cost $100 million now and would return $105 million next year, for a net gain of $5 million. ∙ Investment Z would cost $1 million now and would return $1.2 million next year, for a net gain of $200,000. The firm currently has $150 million of cash on hand that it can loan out at 15 percent interest. Which of the three possible investments should it undertake? a. X only. b. Y only. c. Z only. d. X and Y. e. X and Z. f. X, Y, and Z.
A firm is considering three possible one-year investments, which we will name X, Y, and Z. ∙ Investment X would cost $10 million now and would return $11 million next year, for a net gain of $1 million. ∙ Investment Y would cost $100 million now and would return $105 million next year, for a net gain of $5 million. ∙ Investment Z would cost $1 million now and would return $1.2 million next year, for a net gain of $200,000. The firm currently has $150 million of cash on hand that it can loan out at 15 percent interest. Which of the three possible investments should it undertake? a. X only. b. Y only. c. Z only. d. X and Y. e. X and Z. f. X, Y, and Z.
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 10P
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A firm is considering three possible one-year investments, which we will name X, Y, and Z. ∙
Investment X would cost $10 million now and would return $11 million next year, for a net gain of $1 million.
∙ Investment Y would cost $100 million now and would return $105 million next year, for a net gain of $5 million.
∙ Investment Z would cost $1 million now and would return $1.2 million next year, for a net gain of $200,000.
The firm currently has $150 million of cash on hand that it can loan out at 15 percent interest. Which of the three possible investments should it undertake?
a. X only.
b. Y only.
c. Z only.
d. X and Y.
e. X and Z. f. X, Y, and Z.
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