Final answer:
To assist the Mac Company in investment decisions, one must analyze factors including anticipated returns, investment risks, and NPV for both Stout and Boise projects. Risks are evaluated based on market volatility and strategic fit, while the required 12% ROI guides the financial assessment of each project.
Step-by-step explanation:
When analyzing investment decisions, such as those presented by Mac Company for its Stout and Boise projects, various factors must be considered. These include the potential rates of return, the investment risks, and the alignment with the company's required return on investment (ROI). To calculate the net present value (NPV) for each project, we would discount future cash flows at the company's required rate of return (12%) and subtract the initial investment. The NPV calculation helps us to understand whether the investment is expected to generate value above the company's cost of capital.
The factors influencing the investment decision involve evaluating the expected financial performance, strategic fit with company goals, market conditions, competitive advantage, and potential risks associated with each project. For instance, Stout might have higher potential returns but also higher risks, whereas Boise might offer more stable but lower returns.
Considering risks, investments with higher volatility in returns, such as those associated with new market ventures or technologies, typically carry higher risks. On the other hand, investments in proven markets or with guaranteed contracts may have lower risks. It's also crucial to evaluate the overall market conditions, such as economic stability, demand trends, and competitive landscape, as these can impact both the Stout and Boise investments.