Final answer:
A firm considering an investment that will yield a 6% return while having the cash to invest should calculate the opportunity cost. If no better options exceed a 6% return, the investment should be made. Shareholder wealth maximization is the priority in such decisions.
Step-by-step explanation:
Investment Decision Analysis
When a firm is faced with making an investment decision, it must consider the rate of return on that investment relative to the cost of capital. In the scenario where the firm can earn a 6% return on investment but would have to pay 8% interest if borrowing, it would seem illogical to borrow as the cost exceeds the potential earnings. However, since the firm has the cash available and will not need to borrow, the 8% interest rate is irrelevant.
Shareholders typically want the firm to make decisions that maximize shareholder wealth. For the firm in question, since it can finance the investment using its own cash reserves, the real comparison is between earning a 6% return on the investment or whatever return it could otherwise achieve with its available cash.
To conclude, the firm should calculate the opportunity cost of using the cash. If the opportunity cost is less than a 6% return, then the firm should make the investment as it will result in a net gain. If there are alternative investments that can yield a higher than 6% return, it would be better to invest in those instead.