12

3 points Save Anwe Question 12 Joe Vandelay buys a piece of equipment for $200,000. He puts down $40,000 and finances $160,000 from a local bank Joe s opportunity cost is 5%, and the bank charges 10% on the loan. The after-tax cash flows generated from the equipment are $54,000 per year for the next 5 years. Should Joe buy the equipment based on the IRR rule? O a. Yes as IRR is 9.74% less than Joe's weighted average cost of capital. Ob. No as IRR is 8.65% less than Joe's weighted average cost of capital c. Yes as IRR is 10.92% greater than Joe's weighted average cost of capital d. No as IRR is 11.83% greater than Joe's weighted average cost of capital