1. Discuss the concept of the risk-return trade-off and how it may apply in different circumstances.
2. What is the minimum cash flow that could be received at the end of year 3 to make the following project "acceptable"? Initial cost = $100,000; cash flows at end of years 1 and 2 = $45,000; opportunity cost of capital = 15%
3. What is the equivalent annual cost for a project that requires a $30,000 investment at time zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?