A company is considering an investment project that would cost $8 million today and yield a payoff of $10 million in 5 years. Complete the following table by indicating whether the firm should undertake the project for each of the interest rates listed.
Interest Rate
Undertake Project?
Yes or No
7%
6%
5%
4%
Which of the following formulas would help you figure out the exact cutoff for the interest rate between profitability and nonprofitability?
a. 8=10/x^5
b. 8=10/(1+x)^5
c. 8=10×(1+x)5
d. 10=8/(1+x)^5