A firm is considering an investment that will earn a 6% rate of return. If it were to borrow the money, it would have to pay 8% interest on the loan, but it currently has the cash, so it will not need to borrow. Should the firm make the investment?
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Answer:
Cannot say
Explanation:
Irrespective of where the funds are coming from, decision to invest should be compared with other investment opportunities which may or may not yield higher rate of return.
In case this is the only opportunity in consideration, it is preferred to invest without taking a loan (loan would entail interest cost which would lower net return to minus 2%)
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Answer:
sorry this is too hard
Explanation:
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