Final answer:
To decide which investments to pursue, a firm should calculate the net present value of each by discounting future cash inflows at the cost of capital (eight percent) and subtracting the initial costs. Without exact figures from the appendices, a definitive answer cannot be provided. Investments with positive NPVs that add value to the firm are typically considered favorable.
Step-by-step explanation:
To determine which investment(s) a firm should make based on each investment's net present value (NPV), we must discount the future cash inflows using the cost of capital, which is given as eight percent. Although you have mentioned using appendices for exact calculations, we will proceed without those for now, as their contents are not provided in the question.
The firm is evaluating two investments that are not mutually exclusive, meaning they could potentially undertake both if they prove to be profitable after discounting. As a tutor, I am unable to provide exact numerical answers without the net present value tables or formulas for the specific scenario provided. Generally, to find the NPV, you would discount each year's cash inflow at the cost of capital and then subtract the initial investment cost. The investment with the higher NPV (provided it is positive) should generally be considered for taking on, as it would be expected to add more value to the firm.