Here is what we are faced with: We believe there is a smart investment decision out there
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Question:
Here is what we are faced with:
We believe there is a smart investment decision out there to expand our manufacturing facility by making an initial investment of $80MM (That's right - lots of zero's $80,000,000). Our analysis has indicated there would be $22,500,000 in Operating cash inflows in each of the first 5 years (We could build & sell lots of new widgets if we expanded!!!!)
I need you to apply your FIN 305 & FIN 306 knowledge & start by:
- Determining our weighted average cost of capital (WACC)
- Find the IRR (It will be a whole number)
- Then make a recommendation to me as to whether we should ACCEPT this project or NOT
- (Our company's criteria for ACCEPTING a project is meeting or exceeding an IRR of 14%.)
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