Question
2. Consider a project that has upfront costs of $9today (t=0). Next year (t=1), it generates cash flows of $1, and these cash flows grow
2. Consider a project that has upfront costs of $9today (t=0). Next year (t=1), it generates cash flows of $1, and these cash flows grow at a rate of 2%in perpetuity. The opportunity cost of capital for this project is 8%.
a. What is the IRR for this project?
Enter your answer as adecimal(not as a percent) rounded to four(4) decimal places, e.g. enter 0.0555, or 0.1111 (do not enter 5.55% or 11.11%).
IRRProject=
b. Should you invest in this project?
Enter only 1 or 0, where 1=Yes, 0=No. Do not enter text.
c. Suppose that in addition to the cash flows described above, in year t=5 there is a one-time bonus cash flow of $10. What is the IRR of the project now? (Hint: you'll want to use Excel to solve this one.)
Enter your answer as adecimal(not as a percent) rounded to four(4) decimal places, e.g. enter 0.0555, or 0.1111 (do not enter 5.55% or 11.11%).
IRRProjectWtihNewCashflow=
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