Foster consolidated is expecting capital rationing to last


Foster Consolidated is expecting capital rationing to last for the next 3 years. The company's cost of capital is 10%, and that cost of capital is expected to continue indefinitely. Cash flows available prior to year 3 are expected to earn a rate of return of 20% a year until the end of capital rationing. A proposed capital investment costs $100,000 and is expected to generate cash flows of $30,000 at the end of each year for 6 years. Is the investment attractive? Why?

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Basic Statistics: Foster consolidated is expecting capital rationing to last
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