If your cost of capital is 18 must you make investment?, Ask an Expert

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Q1) You are thinking of adding new conference room to the hotel. If you don't invest in this new conference room, your cash flows will be as follows:

Years	0	1	2	3	4	5
Cash flows without investment	0	120	125	127	129	132

On the other hand, if you make a decision to invest in conference room, your cash flows, including investment cost and extra revenues, will be as follows:

Years	0	1	2	3	4	5
Cash flows with investment	-60	135	138	150	150	148

If your cost of capital is 18%, must you make investment? What would be maximum cost of capital you could afford to make investment?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M919499

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