Question: The James Company is considering investing in a new project. The project's forecasted net cash flows are the following:
YEAR PROJECT'S FORECASTED NET CASH FLOW ($)
0 -150,000
1 2,000
2 8,000
3 15,000
4 35,000
5 20,000
6 30,000
7 11,000
8 14,000
9 18,000
10 60,000
The project's cost of capital is 11%. Should the project be accepted or not? Why or why not?
Would you anticipate that a firm's Return on Common Equity would be smaller or larger than that same firm's Return on Total Assets?