You are thinking about investing $4,646 in your friend\'s landscaping business.

Question

You are thinking about investing $4,646 in your friend's landscaping business. Even though you know the investment is risky and you can't be sure, you expect your investment to be worth $5,689 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 7% for the year. What should you do? The present value of the return is (Round to the nearest cent) You should (Select from the drop-down menu.)

Explanation / Answer

Answer 1 Present value of return=futue value/(1+required return) present value of return= 5689/1.07 present value of return= 5316.822 Answer 2 Total profit= 5316.82-4646 Total profit= 670.82 Since it has positive return we should accept the project

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