Final answer:
The decision to invest at a 6% return rate should be based on opportunity costs and alternative investment opportunities compared to the firm's cost of capital. If there are no better options, investing the cash on hand might be sensible.
Step-by-step explanation:
The question pertains to a scenario where a firm is making a decision on whether to pursue an investment that yields a 6% return, given that it would have to pay 8% interest on a loan. As the firm has the necessary cash and does not require external borrowing, the key consideration is whether the available funds could be better deployed elsewhere. To properly address the investment decision, one would typically compare the potential return of 6% against the firm's alternative investment options and the cost of capital. The concept of opportunity cost is vital in this situation, as investing the cash means forgoing any other potential investment opportunities that could generate more than a 6% return. If no better options exist, the investment might be sensible; however, if there are opportunities that exceed this rate, the firm should consider them.