Consider the following investment cash flows:
Year Cash Flow
1 : (1,000)
2 : 350
3 : 200
4 : 400
5 : 500
6 : 600
a. What is the return expected on this investment measured in dollar terms if the opportunity cost rate is 8 percent?
b. Provide an explanation, in economic terms, of your answer.
c. What is the return on this investment measured in percentage terms?
d. Should this investment be made? Explain your answer.