Investment decision-investment cost function
Macroeconomics
Your company is considering an investment project that will generate after-tax cash flows of $1,000 per year for the next three years (and then be scrapped, with no salvage value). The cost of the investment is $2,500. Assuming the market interest rate is 10 percent, use the present value formula provided in this chapter to calculate the value of the project. Would you make the investment? If the Fed reduces interest rates to 7 percent, would you make the investment? Explain.
