The Baker Company is considering an investment of $1 million. The investment is expected to produce the following cash flows:
|
Year |
Cash Flow |
|
Year 1 |
$400,000 |
|
Year 2 |
$300,000 |
|
Year 3 |
$300,000 |
|
Year 4 |
$400,000 |
a. What is the annual return on Baker Company’s investment if it invests $1 million?
b. What is the most the Baker Company would invest so that the return on its investment is at least 10%?