You are considering an investment in a clothes distributer. The company needs $1
ID: 2562233 • Letter: Y
Question
You are considering an investment in a clothes distributer. The company needs $106,000 today and expects to repay you $126,00 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 13%. What does the IRR rule say about whether you should invest? What is the IRR of this investment opportunity?
The IRR of this investment opportunity is ________(Round to one decimal place.)Given the riskiness of the investment opportunity, your cost of capital is13%.
What does the IRR rule say about whether you should invest?The IRR rule says that you
should not invest
should invest
should be indifferent
. (Select from the drop-down menu.)
Explanation / Answer
First calculate the IRR of project
IRR = Expected value/Invetment - 1.00
=126000/106000 - 1
=18.87%
answer :
should invest
since IRR is more than cost of capital
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